UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~June 30~~March 31, ~~2005~~2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission ~~file~~File ~~number~~Number: ~~333~~001-~~69620~~32709

LOGO

GEGENWORTH ~~Life~~LIFE ~~and~~AND ~~Annuity~~ANNUITY ~~Assurance~~INSURANCE ~~Company~~COMPANY

(Exact Name of Registrant as Specified in its Charter)

Virginia		54-0283385
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
(State or Other Jurisdiction ofIncorporation or Organization)		(I.R.S. EmployerIdentification Number)
6610 West Broad Street Richmond, Virginia		23230
6610 West Broad StreetRichmond, Virginia		23230
(Address of Principal Executive Offices)		(Zip Code)

(804) 281-6000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ~~(as~~a non-accelerated filer, or a smaller reporting ~~defined~~company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). ~~Yes ¨ No x~~ (Check one):

AtLarge ~~July~~Accelerated ~~29,~~Filer ~~2005,~~¨ ~~25,651~~Accelerated ~~shares of~~Filer ~~common~~¨ ~~stock~~Non-accelerated ~~with~~Filer ax ~~par~~Smaller ~~value~~reporting ofcompany ~~$1,000.00 were outstanding. The common stock of GE Life and Annuity Assurance Company is not publicly traded.~~ ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

At April 29, 2008, 25,651 shares of common stock with a par value of $1,000.00 were outstanding. The common stock of Genworth Life and Annuity Insurance Company is not publicly traded.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

TABLE OF CONTENTS

	Page	~~Page~~
PART I—FINANCIAL INFORMATION
Item 1.	Condensed, Consolidated Financial Statements
Item 1. Financial Statements	3
	Condensed, Consolidated Statement of Current and Retained Earnings for the three and six months ended June 30, 2005 and 2004, (Unaudited)	1
Condensed Consolidated Statements of Income for the three months ended March 31, 2008 and 2007 (Unaudited)	3
	Condensed, Consolidated Statement of Financial Position as of June 30, 2005 (Unaudited) and December 31, 2004	2
Condensed Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007	4
	Condensed, Consolidated Statement of Cash Flows for the six months ended June 30, 2005 and 2004 (Unaudited)	3
Condensed Consolidated Statements of Changes in Stockholder’s Equity for the three months ended March 30, 2008 and 2007 (Unaudited)	5
	Notes to Condensed, Consolidated Financial Statements (Unaudited)	4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 4.	Controls and Procedures	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
PART II—OTHER INFORMATION
Item 4. Controls and Procedures	36
Item 1.	Legal Proceedings	12
PART II—OTHER INFORMATION
Item 6.	Exhibits	13
Item 1. Legal Proceedings	37
Signatures		14
Item 1A. Risk Factors	37
Item 6. Exhibits	37
Signatures	38

PART I—FINANCIAL INFORMATION

Item 1. ~~Condensed, Consolidated~~ Financial Statements

GEGENWORTH LIFE AND ANNUITY ~~ASSURANCE~~INSURANCE COMPANY ~~AND SUBSIDIARY~~

~~Condensed,~~ CONDENSED ~~Consolidated~~CONSOLIDATED ~~Statement~~STATEMENTS ofOF ~~Current~~INCOME ~~and Retained Earnings~~

(~~Dollar~~Amounts ~~amounts~~ in millions)

(Unaudited)

	Three months endedJune 30,						Six months endedJune 30,
	Three months endedMarch 31,
	2005			2004			2005		2004
	2008			2007
Revenues:
Net investment income	$	98.1		$	84.4		$	205.9	$	213.5
Premiums	$	268.6		$	255.9
Net realized investment gains (losses)		(1.4	)		2.0			1.7		3.1
Net investment income		271.2			285.3
Premiums		26.3			26.5			51.3		52.5
Net investment gains (losses)		(65.2	)		(1.6	)
Cost of insurance		35.1			34.4			73.0		70.8
Policy fees and other income		135.3			117.9
Variable product fees		4.9			(26.9	)		9.0		3.6
Total revenues		609.9			657.5
Other income		7.9			1.3			14.1		10.4
Benefits and expenses:
Total revenues		170.9			121.7			355.0		353.9
Benefits and other changes in policy reserves		265.4			265.0
Benefits and expenses:
Interest credited		125.3			129.8
Interest credited		67.2			49.8			138.1		147.4
Acquisition and operating expenses, net of deferrals		60.8			49.7
Benefits and other changes in policy reserves		50.7			38.9			102.4		96.2
Amortization of deferred acquisition costs and intangibles		31.6			40.7
Underwriting, acquisition and insurance expenses, net of deferrals		25.8			1.8			47.3		35.3
Interest expense		46.1			42.0
Amortization of deferred acquisition costs and intangibles		9.7			43.4			13.7		77.9
Total benefits and expenses		529.2			527.2
Total benefits and expenses		153.4			133.9			301.5		356.8
Income before income taxes and equity in net income (loss) of unconsolidated subsidiary		80.7			130.3
Earnings (loss) before income taxes and cumulative effect of change in accounting principle		17.5			(12.2	)		53.5		(2.9	)
Provision for income taxes		25.3			41.7
Provision (benefit) for income taxes		2.1			(162.6	)		11.1		(159.8	)
Net income before equity in net income (loss) of unconsolidated subsidiary		55.4			88.6
Earnings before cumulative effect of change in accounting principle		15.4			150.4			42.4		156.9
Equity in net income (loss) of unconsolidated subsidiary		(1.9	)		4.9
Cumulative effect of change in accounting principle, net of tax of $0.4 million		—			—			—		0.7
Net income	$	53.5		$	93.5
Net earnings		15.4			150.4			42.4		157.6
Retained earnings at beginning of period		335.0			534.9			308.0		527.7
Dividends declared		—			(403.6	)		—		(403.6	)
Retained earnings at end of period	$	350.4		$	281.7		$	350.4	$	281.7

See Notes to Condensed, Consolidated Financial Statements

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statement of Financial Position

(Dollar amounts in millions, except share amounts)

	June 30,2005		December 31,2004
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value	$	6,223.3	$	7,001.2
Equity securities available-for-sale, at fair value		28.0		26.8
Mortgage loans, net of valuation allowance		1,085.2		1,207.7
Policy loans		151.5		148.4
Other invested assets		425.5		466.5
Total investments		7,913.5		8,850.6
Cash and cash equivalents		120.9		26.4
Accrued investment income		72.1		81.5
Deferred acquisition costs		279.0		248.1
Goodwill		57.5		57.5
Intangible assets		140.1		120.6
Reinsurance recoverable		2,601.6		2,753.8
Other assets		42.1		51.5
Deferred income tax asset		—		5.9
Separate account assets		8,448.8		8,636.7
Total assets	$	19,675.6	$	20,832.6
Liabilities and Stockholder’s Interest
Liabilities:
Future annuity and contract benefits	$	8,592.8	$	9,604.6
Liability for policy and contract claims		83.5		89.4
Other policyholder liabilities		271.8		235.9
Other liabilities		611.1		676.0
Deferred income tax liability		27.1		—
Separate account liabilities		8,448.8		8,636.7
Total liabilities		18,035.1		19,242.6
Stockholder’s interest:
Common stock ($1,000 par value, 50,000 shares authorized, 25,651 shares issued and outstanding)		25.6		25.6
Preferred stock, Series A ($1,000 par value, $1,000 redemption and liquidation value, 200,000 shares authorized, 120,000 shares issued and outstanding)		120.0		120.0
Additional paid-in capital		1,061.1		1,061.1
Accumulated non-owner changes in stockholder’s interest:
Net unrealized investment gains		80.6		72.0
Derivatives qualifying as hedges		2.8		3.3
Total accumulated non-owner changes in stockholder’s interest		83.4		75.3
Retained earnings		350.4		308.0
Total stockholder’s interest		1,640.5		1,590.0
Total liabilities and stockholder’s interest	$	19,675.6	$	20,832.6

See Notes to Condensed, Consolidated Financial Statements

GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY

Condensed, Consolidated Statement of Cash Flows

(Dollar amounts in millions)

(Unaudited)

	Six months endedJune 30,
	2005			2004
Cash flows from operating activities
Net earnings	$	42.4		$	157.6
Adjustments to reconcile net earnings to net cash from operating activities:
Change in reserves		60.2			154.9
Deferred income taxes		29.2			(214.9	)
Other, net		12.0			(61.8	)
Net cash from operating activities		143.8			35.8
Cash flows from investing activities
Short-term investment activity, net		—			84.7
Proceeds from sales, and maturities of investment securities and other invested assets		1,230.2			827.1
Principal collected on mortgage and policy loans		186.8			148.5
Purchases of investment securities and other invested assets		(468.8	)		(606.6	)
Mortgage and policy loan originations		(67.4	)		(145.1	)
Net cash from investing activities		880.8			308.6
Cash flows from financing activities
Proceeds from issuance of investment contracts		625.1			538.6
Redemption and benefit payments on investment contracts		(1,544.5	)		(812.5	)
Proceeds from short-term borrowings		355.4			153.7
Payments on short-term borrowings		(366.1	)		(159.9	)
Cash dividends to shareholders		—			(30.4	)
Net cash from financing activities		(930.1	)		(310.5	)
Net change in cash and cash equivalents		94.5			33.9
Cash and cash equivalents at beginning of period		26.4			12.4
Cash and cash equivalents at end of period	$	120.9		$	46.3

See Notes to Condensed, Consolidated Financial Statements

GEGENWORTH LIFE AND ANNUITY ~~ASSURANCE~~INSURANCE COMPANY ~~AND SUBSIDIARY~~

~~Notes~~ CONDENSED toCONSOLIDATED ~~Condensed,~~BALANCE ~~Consolidated~~SHEETS ~~Financial Statements~~

(~~Unaudited)~~Amounts in millions, except share and per share amounts)

1. Basis of Presentation


	March 31, 2008			December 31, 2007
	(Unaudited)
Assets
Investments:
Fixed maturity securities available-for-sale, at fair value	$	14,354.0		$	15,237.3
Equity securities available-for-sale, at fair value		62.6			64.0
Commercial mortgage loans		2,912.9			2,968.1
Policy loans		470.3			466.8
Other invested assets ($397.7 and $399.8 restricted)		1,645.5			1,437.5

Total investments		19,445.3			20,173.7
Cash and cash equivalents		809.2			616.4
Accrued investment income		192.4			167.4
Deferred acquisition costs		3,069.5			2,962.2
Goodwill		450.9			450.9
Intangible assets		517.9			502.3
Reinsurance recoverable		8,632.0			8,670.6
Other assets		456.2			427.8
Separate account assets		11,343.9			12,005.8

Total assets	$	44,917.3		$	45,977.1

Liabilities and stockholder’s equity
Liabilities:
Future policy benefits	$	9,840.0		$	9,809.4
Policyholder account balances		13,954.9			13,962.3
Liability for policy and contract claims		260.2			263.1
Unearned premiums		21.8			21.4
Deferred income tax liability		914.1			1,077.9
Non-recourse funding obligations		3,555.0			3,555.0
Other liabilities ($414.2 and $415.1 restricted)		1,097.0			995.8
Separate account liabilities		11,343.9			12,005.8

Total liabilities		40,986.9			41,690.7

Commitments and contingencies

Stockholder’s equity:
Common stock ($1,000 par value, 50,000 shares authorized, 25,651 shares issued and outstanding)		25.6			25.6
Additional paid-in capital		4,071.6			4,071.6

Accumulated other comprehensive income (loss):
Net unrealized investment gains (losses)		(749.7	)		(338.2	)
Derivatives qualifying as hedges		7.2			4.9

Total accumulated other comprehensive income (loss)		(742.5	)		(333.3	)
Retained earnings		575.7			522.5

Total stockholder’s equity		3,930.4			4,286.4

Total liabilities and stockholder’s equity	$	44,917.3		$	45,977.1

~~The~~See ~~accompanying~~Notes ~~condensed,~~to ~~consolidated~~Condensed ~~quarterly~~Consolidated ~~financial~~Financial ~~statements~~Statements represent GE Life and Annuity Assurance Company and its consolidated subsidiary, Assigned Settlement, Inc. (the “Company”, “we”, “us”, or “our” unless the context otherwise requires). All significant intercompany transactions have been eliminated.

We principally offer annuity contracts, guaranteed investment contracts, funding agreements, Medicare supplement insurance and life insurance policies. We do business in all states, except New York, and in the District of Columbia.

We label our quarterly information using a calendar convention, that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our practice to establish actual interim closing dates using a “fiscal” calendar, which requires our businesses to close their books on a Saturday in order to normalize the potentially disruptive effects of quarterly closings on business processes. The effects of this practice are modest and only exist within a reporting year.

The accompanying condensed, consolidated quarterly financial statements are unaudited and have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These condensed, consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary by management to present a fair statement of the financial position, results of operations, and cash flow for the periods presented. The results reported in these condensed, consolidated quarterly financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed, consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2004, contained in our Annual Report on Form 10-K, as of December 31, 2004. Certain prior year amounts have been reclassified to conform with the current year presentation.

On May 24, 2004, GE Financial Assurance Holdings, Inc. (“GEFAHI”), an indirect subsidiary of General Electric Company (“GE”), transferred substantially all of its assets to Genworth Financial, Inc. (“Genworth”), including all of the outstanding capital stock of GNA Corporation (“GNA”), our indirect parent, and 800 shares of our common stock that GEFAHI had held directly. As a result, we became an indirect, wholly-owned subsidiary of Genworth. On May 25, 2004, Genworth’s Class A common stock began trading on The New York Stock Exchange. As of June 30, 2005, approximately 48% of Genworth’s common stock is now owned by public shareholders. GEFAHI continues to own approximately 52% of Genworth’s common stock.

On May 31, 2004, (1) Genworth contributed to GNA and GNA in turn contributed to General Electric Capital Assurance Company (“GECA”) 800 shares of our common stock and (2) Federal Home Life Insurance Company paid a dividend to GECA consisting of 2,378 shares of our common stock. As a result of the foregoing contribution and dividend, we became a direct, wholly-owned subsidiary of GECA while remaining an indirect, wholly-owned subsidiary of Genworth.

GEGENWORTH LIFE AND ANNUITY ~~ASSURANCE~~INSURANCE COMPANY ~~AND SUBSIDIARY~~

~~Notes~~ CONDENSED toCONSOLIDATED ~~Condensed,~~STATEMENTS ~~Consolidated~~OF ~~Financial~~CHANGES ~~Statements—(Continued)~~ IN STOCKHOLDER’S EQUITY

(Amounts in millions)

(Unaudited)

2. Non-owner Changes in Stockholder’s Interest


	Preferred stock			Common stock		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Total stockholder’s equity
Balances as of December 31, 2006	$	110.0		$	25.6	$	4,025.3	$	22.0		$	260.8		$	4,443.7

Comprehensive income (loss):
Net income		—			—		—		—			93.5			93.5
Net unrealized gains (losses) on investment securities		—			—		—		15.5			—			15.5
Derivatives qualifying as hedges		—			—		—		(0.2	)		—			(0.2	)

Total comprehensive income (loss)															108.8
Redemption of preferred stock		(110.0	)		—		—		—			—			(110.0	)
Dividends and other transactions with stockholder		—			—		49.1		—			(7.2	)		41.9

Balances as of March 31, 2007	$	—		$	25.6	$	4,074.4	$	37.3		$	347.1		$	4,484.4

A summary of changes in stockholder’s interest that do not result directly from transactions with our stockholder is as follows:


	Common stock		Additional paid-in capital		Accumulated other comprehensive income (loss)			Retained earnings			Total stockholder’s equity
Balances as of December 31, 2007	$	25.6	$	4,071.6	$	(333.3	)	$	522.5		$	4,286.4

Comprehensive income (loss):
Net income		—		—		—			53.5			53.5
Net unrealized gains (losses) on investment securities		—		—		(411.5	)		—			(411.5	)
Derivatives qualifying as hedges		—		—		2.3			—			2.3

Total comprehensive income (loss)												(355.7	)
Dividends and other transactions with stockholder		—		—		—			(0.3	)		(0.3	)

Balances as of March 31, 2008	$	25.6	$	4,071.6	$	(742.5	)	$	575.7		$	3,930.4

	Three months endedJune 30,					Six months endedJune 30,
(Dollar amounts in millions)	2005		2004			2005			2004
Net earnings	$	15.4	$	150.4		$	42.4		$	157.6
Unrealized gains (losses) on investment securities—net		44.1		(163.1	)		8.6			(80.7	)
Derivatives qualifying as hedges, net		1.7		(2.4	)		(0.5	)		(1.0	)
Total	$	61.2	$	(15.1	)	$	50.5		$	75.9

See Notes to Condensed Consolidated Financial Statements

3. Operating Segment Information

We conduct our operations in two business segments. 1) Retirement Income and Investments and 2) Protection. We also have a Corporate and Other segment.

Through our Retirement Income and Investments segment, we offer deferred annuities (variable and fixed) and variable life insurance to a broad range of individual consumers who want to accumulate tax-deferred assets for retirement, desire a tax-efficient source of income and seek to protect against outliving their assets. We also offer guaranteed investment contracts (“GICs”) and funding agreements as investment products to qualified institutional buyers.

Our Protection segment includes universal life insurance, interest-sensitive whole life insurance and Medicare supplement insurance. Life insurance products provide protection against financial hardship after the death of an insured by providing cash payment to the beneficiaries of the policyholder. Medicare supplement insurance provides coverage for Medicare-qualified expenses that are not covered by Medicare because of applicable deductibles or maximum limits.

The Corporate and Other segment consists primarily of net realized investment gains (losses), interest and other financing expenses.

GEGENWORTH LIFE AND ANNUITY ~~ASSURANCE~~INSURANCE COMPANY ~~AND SUBSIDIARY~~

~~Notes~~ CONDENSED toCONSOLIDATED ~~Condensed,~~STATEMENTS ~~Consolidated~~OF ~~Financial~~CASH ~~Statements—(Continued)~~ FLOWS

(Amounts in millions)

(Unaudited)

The following is a summary of operating segment activity:


	Three months ended March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	53.5		$	93.5
Adjustments to reconcile net income to net cash from operating activities:
Net investments (gains) losses		65.2			1.6
Equity in net (income) loss of unconsolidated subsidiary		1.9			(4.9	)
Charges assessed to policyholders		(93.8	)		(79.7	)
Purchases of trading securities		(18.7	)		(1.4	)
Amortization of fixed maturity discounts and premiums		(1.4	)		(0.6	)
Acquisition costs deferred		(114.8	)		(116.6	)
Amortization of deferred acquisition costs and intangibles		31.6			40.7
Deferred income taxes		45.7			42.8
Change in certain assets and liabilities:
Accrued investment income and other assets		(84.1	)		(189.6	)
Insurance reserves		138.8			145.9
Other liabilities and policy-related balances		11.2			112.2

Net cash from operating activities		35.1			43.9

Cash flows from investing activities:
Proceeds from maturities and repayments of investments:
Fixed maturities		398.9			626.0
Commercial mortgage loans		85.6			90.3
Proceeds from sales of investments:
Fixed maturities and equity securities		77.3			449.3
Purchases and originations of investments:
Fixed maturities and equity securities		(246.3	)		(895.1	)
Commercial mortgage loans		(25.4	)		(70.6	)
Other invested assets, net		(31.5	)		(55.3	)
Cash related to transfer of subsidiary to an affiliate		—			(27.0	)
Policy loans, net		(3.5	)		(1.0	)

Net cash from investing activities		255.1			116.6

Cash flows from financing activities:
Proceeds from issuance of investment contracts		991.7			776.8
Redemption and benefit payments on investment contracts		(1,109.9	)		(964.7	)
Proceeds from short-term borrowings and other, net		20.8			88.0
Payments on short-term borrowings		—			(146.8	)
Redemption of preferred stock		—			(110.0	)
Dividends paid to stockholder		—			(2.5	)

Net cash from financing activities		(97.4	)		(359.2	)

Net change in cash and cash equivalents		192.8			(198.7	)
Cash and cash equivalents at beginning of period		616.4			423.8

Cash and cash equivalents at end of period	$	809.2		$	225.1

	Three monthsended June 30,						Six monthsended June 30,
(Dollar amounts in millions)	2005			2004			2005		2004
Revenues
Retirement Income and Investments	$	71.5		$	9.6		$	144.9	$	137.6
Protection		94.9			94.1			189.4		189.7
Corporate and Other		4.5			18.0			20.7		26.6
Total revenues	$	170.9		$	121.7		$	355.0	$	353.9
Earnings (loss) before income taxes and cumulative change in accounting principle
Retirement Income and Investments	$	5.7		$	(42.9	)	$	23.4	$	(43.8	)
Protection		16.0			14.0			27.1		21.8
Corporate and Other		(4.2	)		16.7			3.0		19.1
Earnings (loss) before income taxes and cumulative effect of change in accounting principle	$	17.5		$	(12.2	)	$	53.5	$	(2.9	)

See Notes to Condensed Consolidated Financial Statements

The following is a summary of assets by operating segment:

(Dollar amounts in millions)	June 30,2005		December 31,2004
Assets
Retirement Income and Investments	$	15,458.4	$	16,742.4
Protection		2,728.8		2,745.7
Corporate and Other		1,488.4		1,344.5
Total assets	$	19,675.6	$	20,832.6

~~Item~~GENWORTH 2.LIFE ~~Management’s~~AND ~~Discussion~~ANNUITY ~~and~~INSURANCE ~~Analysis~~COMPANY ~~of Financial Condition and Results of Operations.~~

~~Cautionary~~ NOTES ~~note~~TO ~~regarding~~CONDENSED ~~forward-looking~~CONSOLIDATED ~~statements~~FINANCIAL STATEMENTS

~~This~~(Unaudited) report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors, including the following:

•1. ~~Risks~~Formation ~~relating to our businesses, including interest rate fluctuations, downturns~~ and ~~volatility~~Nature ~~in equity markets, defaults in portfolio securities, downgrades in our financial strength and credit ratings, insufficiency~~ of ~~reserves,~~Business legal constraints on dividend distributions, illiquidity of investments, competition, inability to attract or retain independent sales intermediaries and dedicated sales specialists, defaults by counterparties, foreign exchange rate fluctuations, regulatory restrictions on our operations and changes in applicable laws and regulations, legal or regulatory actions or investigations, political or economic instability and the threat of terrorism and terrorist acts;

•Genworth ~~Risks~~Life ~~relating~~and toAnnuity Insurance Company (the “Company,” “GLAIC,” “we,” “us” or “our” ~~Protection~~unless ~~and~~the context ~~Retirement~~otherwise ~~Income~~requires) ~~and~~is ~~Investments~~a ~~segments,~~stock ~~including~~life ~~unexpected~~insurance ~~changes~~company inoperating ~~mortality,~~under ~~morbidity~~a ~~and~~charter ~~unemployment~~granted ~~rates,~~by ~~accelerated~~the ~~amortization~~Commonwealth of ~~deferred~~Virginia ~~acquisition~~on ~~costs~~March 21, ~~and~~1871 ~~present~~as ~~value~~The Life Insurance Company of ~~future~~Virginia. ~~profits,~~An ~~goodwill~~affiliate ~~impairments,~~of ~~medical~~our ~~advances~~former ~~such~~ultimate asparent ~~genetic~~company acquired ~~mapping~~us ~~research~~on April 1, ~~unexpected~~1996 ~~changes~~and inultimately ~~persistency~~contributed ~~rates,~~the ~~increases~~majority inof ~~statutory~~the ~~reserve~~outstanding ~~requirements~~common ~~and~~stock ~~changes~~to inGenworth ~~tax~~Life ~~and~~Insurance ~~securities~~Company ~~laws;~~(“GLIC”).

•On ~~Risks~~May 31, ~~relating~~2004, towe ~~our~~became ~~separation~~a ~~from GE~~direct, ~~including~~wholly-owned ~~the~~subsidiary ~~loss~~ of ~~benefits~~GLIC ~~associated~~while ~~with~~remaining ~~GE’s~~an ~~brand and reputation~~indirect, ~~our~~wholly-owned ~~need~~subsidiary toof ~~establish~~Genworth ~~our~~Financial, ~~new~~Inc. (“Genworth”). ~~brand~~Until ~~identify~~March 12, ~~quickly and effectively~~2007, ~~the~~our preferred ~~possibility~~shares ~~that~~were weowned ~~will~~by ~~not~~an beaffiliate, ~~able~~Brookfield toLife ~~replace~~Assurance ~~services~~Company ~~previously~~Limited. ~~provided~~On byMarch 12, GE2007, onwe ~~terms~~redeemed ~~that~~the ~~are~~remaining atoutstanding ~~least~~preferred asshares ~~favorable,~~for ~~potential~~par ~~conflicts~~value of ~~interest~~$110.0 ~~with~~million GE and ~~GE’s~~paid ~~engaging~~$2.5 million in dividends on the ~~same~~redeemed preferred ~~type~~shares. ofOn ~~business~~April 30, as2007, wethe doissued inshares ~~the~~of ~~future~~preferred stock were retired.

WeThe ~~undertake~~accompanying nocondensed ~~obligation~~consolidated tofinancial ~~publicly~~statements ~~update~~include ~~any~~the ~~forward-looking~~historical ~~statement~~operations and accounts of the Company and its subsidiaries which include Assigned Settlement, ~~whether~~Inc., asGNWLAAC aReal ~~result~~Estate ofHolding, ~~new~~LLC, ~~information~~Jamestown Life Insurance Company, ~~future~~River ~~developments~~Lake orInsurance ~~otherwise~~Company (“River Lake I”), River Lake Insurance Company II (“River Lake II”), River Lake Insurance Company III (“River Lake III”), River Lake Insurance Company IV Limited (“River Lake IV”), River Lake Insurance Company V (“River Lake V”) and Rivermont Life Insurance Company I (“Rivermont I”). All significant intercompany accounts and transactions have been eliminated in consolidation.

~~Results~~We offer term and universal life insurance and Medicare supplement insurance. We also offer fixed and variable deferred and immediate individual annuities, group variable annuities offered through retirement plans, and institutional products which include funding agreements backing notes (“FABNs”), funding agreements and guaranteed investment contracts (“GICs”). On March 25, 2008, we announced our intention to discontinue the sales of ~~Operations~~variable life insurance policies beginning on and after May 1, 2008. We do business in Bermuda, the District of Columbia and all states, except New York.

~~Three~~The ~~Months~~accompanying ~~Ended~~condensed ~~June~~consolidated ~~30,~~financial ~~2005~~statements ~~Compared~~are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Preparing financial statements in conformity with U.S. GAAP requires us to ~~Three~~make ~~Months~~estimates ~~Ended~~and ~~June~~assumptions 30that affect reported amounts and related disclosures. Actual results could differ from those estimates. These condensed consolidated financial statements include all adjustments considered necessary by management to present a fair statement of the financial position, ~~2004~~results of operations and cash flows for the periods presented. The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. The condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in our 2007 Annual Report on Form 10-K filed on February 28, 2008.

On April 15, 2004, we entered into reinsurance transactions in which we ceded to Union Fidelity Life Insurance Company (“UFLIC”), an affiliate, substantially all of our in-force blocks of variable annuities and structured settlements2. ~~The~~Accounting ~~reinsurance~~Pronouncements transactions were executed in the second quarter 2004, with an effective date of January 1, 2004. This had the effect of ceding three additional months of activity during the three months ended June 30, 2004.

~~Net~~Recently ~~investment income increased $13.7 million, or 16.2%, to $98.1 million for the three months ended June 30, 2005 from $84.4 million in the comparable 2004 period. The increase was primarily~~adopted attributable to reinsurance transactions with UFLIC, executed in the second quarter of 2004, offset by a $15.2 million decline in investment income resulting from both a decline in average invested assets and a decline in weighted average investment yields in the second quarter 2005 compared to the second quarter 2004. The decline in average invested assets was due primarily to a decline of our in-force guaranteed investment contracts (“GICs”) and funding agreements.

~~Net~~Fair ~~realized~~Value ~~investment~~Measurements gains (losses) decreased $3.4 million to a loss of $(1.4) million for the three months ended June 30, 2005 from a gain of $2.0 million in the comparable 2004 period. For 2005, gross realized investment gains and (losses) were $1.3 million and $(2.7) million, respectively. For 2004, gross realized gains and (losses) were $3.3 million and $(1.3) million, respectively. Impairment losses recognized as part of gross realized losses in the three months ended June 30, 2005 were $0.2 million. There were no impairment losses recognized in the three month period ended June 30, 2004.

As of January 1, 2008, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value and

~~Premiums~~GENWORTH ~~decreased~~LIFE ~~$0.2~~AND ~~million,~~ANNUITY orINSURANCE ~~0.8%,~~COMPANY to $26.3 million for the three months ended June 30, 2005 from $26.5 million in the comparable 2004 period. The decrease was primarily attributable to a $1.3 million decline in premiums from a runoff block of whole life policies, partially offset by a $1.1 million increase primarily from our Medicare supplement products.

~~Cost~~NOTES ofTO ~~insurance increased~~CONDENSED ~~$0.7~~CONSOLIDATED ~~million,~~FINANCIAL orSTATEMENTS—(Continued) 2.0% to $35.1 million for the three months ended June 30, 2005 from $34.4 million in the comparable 2004 period. The increase was primarily attributable to product guarantees on new variable annuity business.

~~Variable product fees increased $31.8 million, to $4.9 million for the three months ended June 30, 2005 from $~~(~~26.9~~Unaudited) million in the comparable 2004 period. The increase was primarily attributable to the reinsurance transactions with UFLIC in the second quarter 2004, in which we ceded $29.0 million of variable product fees to UFLIC, and an increase of $2.7 million in product fees associated with new variable annuity business.

~~Other~~ expands ~~income~~disclosures ~~increased~~about $6fair value measurements.6 ~~million~~The toadoption $7of SFAS No.9 157 ~~million~~did ~~for~~not ~~the~~have ~~three~~a ~~months~~material ~~ended~~impact ~~June~~on ~~30,~~our ~~2005~~consolidated ~~from~~financial $1statements.3 Additionally, ~~million~~on inJanuary 1, 2008, we elected the ~~comparable~~partial ~~2004 period~~adoption of SFAS No. 157 ~~The~~under ~~increase~~the ~~was~~provisions ~~primarily~~of ~~attributable~~Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) FAS 157-2, which amends SFAS No. 157 to allow an entity to delay the ~~reinsurance~~application ~~transactions~~of ~~with~~this statement until January ~~UFLIC~~1, in2009 for certain non-financial assets and liabilities. Under the ~~second~~provisions ~~quarter~~of the ~~2004~~FSP, ~~and~~we anwill ~~increase~~delay the application of SFAS No. 157 for fair value measurements used in ~~surrender~~the impairment testing of goodwill and ~~other~~indefinite-lived ~~fees~~intangible ~~associated~~assets ~~with~~and ~~variable~~eligible ~~annuity~~non-financial assets and ~~universal~~liabilities ~~life~~included ~~products~~within ina business combination. In January 2008, FASB also issued proposed FSP FAS 157-c that would amend SFAS No. 157 to clarify the ~~amounts~~principles on fair value measurement of $1liabilities.1 Management is monitoring the status of this proposed FSP for any impact on ~~million~~our ~~and~~consolidated $1financial statements.1 ~~million,~~See ~~respectively~~note 4 for additional disclosures about fair value measurement.

~~Interest credited~~Fair ~~increased~~Value ~~$17.4~~Option million, or 34.9%, to $67.2 million in the three months ended June 30, 2005 from $49.8 million in the comparable 2004 period. The increase was primarily attributable to the reinsurance transactions with UFLIC, infor ~~which~~Financial weAssets ~~ceded $22.6 million interest credited. This was partially offset by a $2.6 million decrease attributable to a decline of our in-force GICs~~ and ~~funding~~Financial ~~agreements~~Liabilities ~~and a $1.8 million decline attributable to lower average interest crediting rates on a runoff block of universal life policies.~~

~~Benefits~~As ~~and~~of ~~other~~January 1, ~~changes~~2008, inwe ~~policy~~adopted ~~reserves~~SFAS ~~increased~~No. 159, ~~$11~~The Fair Value Option for Financial Assets and Financial Liabilities.8 ~~million~~This statement provides an option, oron ~~30.3%~~specified election dates, to ~~$50.7~~report ~~million~~selected infinancial ~~the~~assets ~~three~~and ~~months~~liabilities, ~~ended~~including ~~June~~insurance 30contracts, ~~2005~~at ~~from~~fair ~~$38~~value.9 ~~million~~Subsequent changes in ~~the~~fair ~~comparable~~value ~~2004~~for designated ~~period.~~items ~~The~~are ~~increase~~reported ~~was~~in ~~primarily attributable~~income toin the ~~reinsurance~~current ~~transactions~~period. ~~with~~The ~~UFLIC,~~adoption inof ~~which~~SFAS weNo. 159 ~~ceded~~did ~~$4.2~~not ~~million~~impact ofour ~~benefits~~consolidated ~~and~~financial ~~other~~statements, ~~changes~~as inno ~~policy~~items ~~reserves.~~were ~~Also~~elected ~~contributing~~for tomeasurement ~~the~~at ~~increase~~fair ~~was~~value aupon $2initial adoption.9 ~~million~~We ~~increase~~will ~~attributable~~continue to evaluate ~~growth~~eligible offinancial ~~in-force~~assets ~~variable annuities,~~and aliabilities ~~$3.4~~on ~~million~~their ~~increase~~election ~~due~~dates. toAny ~~unfavorable~~future ~~mortality~~elections ~~related~~will tobe ~~universal~~disclosed ~~life~~in ~~products~~accordance ~~and~~with athe ~~$1.3~~provisions ~~million~~outlined ~~increase~~in ~~attributable~~the ~~to immediate annuities~~statement.

~~Underwriting,~~Amendment ~~acquisition and insurance expenses, net~~ of ~~deferrals~~FASB ~~increased~~Interpretation ~~$24~~No.0 39 million to $25.8 million in the three months ended June 30, 2005 from $1.8 million in the comparable 2004 period. The increase was primarily attributable to lower expenses in the second quarter 2004 in the amount of $18.6 million due to the reinsurance transactions with UFLIC. Also contributing to the increase was a $4.3 million increase in legal fees primarily attributable to a settlement reached in the second quarter 2005.

~~Amortization~~As of ~~deferred~~January 1, ~~acquisition~~2008, ~~costs~~we ~~and~~adopted ~~intangibles~~FSP ~~decreased~~FASB ~~$33.7~~Interpretation ~~million~~(“FIN”) No. 39-1, orAmendment 77of FASB Interpretation No.6% 39. This FSP amends FIN No. 39, Offsetting of Amounts Related to ~~$9.7~~Certain ~~million~~Contracts, to allow fair value amounts recognized for ~~the~~collateral ~~three~~to ~~months~~be ~~ended June~~offset ~~30,~~against ~~2005,~~fair ~~from~~value ~~$43.4~~amounts ~~million~~recognized infor derivative instruments that are executed with the ~~comparable~~same ~~2004~~counterparty ~~period~~under certain circumstances. The ~~decrease~~FSP ~~was~~also ~~primarily~~requires ~~attributable~~an entity to adisclose the ~~$59.8~~accounting ~~million~~policy ~~goodwill~~decision ~~impairment~~to ~~charge~~offset, inor ~~the~~not ~~second~~to ~~quarter~~offset, ~~2004~~fair ~~resulting~~value ~~from~~amounts ~~the~~in ~~reinsurance~~accordance ~~transactions~~ with ~~UFLIC~~FIN No. 39, ~~which~~as ~~was partially~~amended. ~~offset~~As bywe ado ~~$26.2~~not ~~million~~have ~~decline~~collateral ~~also~~arrangements ~~attributable~~for toour derivative instruments, there was no impact from the ~~reinsurance~~adoption ~~transactions~~of FIN No. 39-1.

~~Provision~~Not ~~(benefit)~~yet ~~for~~adopted income taxes increased $164.7 million to an expense of $2.1 million for the three months ended June 30, 2005 from a benefit of $162.6 million for the three months ended June 30, 2004. The increase in tax provision was primarily attributable to the tax benefit associated with the reinsurance transactions with UFLIC in the three months ended June 30, 2004, partially offset by favorable examination developments in the three months ended June 30, 2005.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. This statement requires enhanced disclosures about an entity’s derivative and hedging activities. SFAS No. 161 will be effective for us on January 1, 2009. We do not expect SFAS No. 161 to have a material impact on our consolidated financial statements.

In December 2007, FASB issued SFAS No. 141R, Business Combinations. This statement establishes principles and requirements for how an acquirer recognizes and measures certain items in a business combination, as well as disclosures about the nature and financial effects of a business combination. SFAS No. 141R will be effective for us on January 1, 2009 and will be applied to business combinations for which the acquisition date is on or after the effective date. We do not expect SFAS No. 141R to have a material impact on our consolidated financial statements.

In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This statement establishes accounting and reporting standards for

~~Earnings~~GENWORTH ~~before~~LIFE ~~cumulative~~AND ~~effect~~ANNUITY ofINSURANCE ~~change~~COMPANY in accounting principle decreased $135.0 million to $15.4 million for the three months ended June 30, 2005 from $150.4 million in the comparable 2004 period. The decrease was primarily attributable to a $187.8 decrease in our Corporate and Other segment, partially offset by a $51.5 million increase in our Retirement Income and Investments segment and a $1.3 million increase in our Protection segment. The decrease in our Corporate and Other segment is primarily attributable to the tax benefit associated with the reinsurance transactions with UFLIC in the three months ended June 30, 2004. The increase in our Retirement Income and Investments segment was primarily attributable to a goodwill impairment charge in the second quarter 2004 resulting from the reinsurance transactions with UFLIC.

~~Six~~NOTES ~~Months~~TO ~~Ended~~CONDENSED ~~June~~CONSOLIDATED ~~30,~~FINANCIAL ~~2005~~STATEMENTS—(Continued) ~~Compared to Six Months Ended June 30, 2004~~

~~Net~~(Unaudited) investment income decreased $7.6 million, or 3.6%, to $205.9 million for the six months ended June 30, 2005 from $213.5 million in the comparable 2004 period. The decrease was primarily the result of lower levels of average invested assets attributable to a decline in GICs and funding agreements. Average invested assets for the six months ended June 30, 2005 were $7,677.4 million compared to $8,296.0 million for the six months ended June 30, 2004.

~~Net realized investment gains (losses) decreased $1.4 million,~~ ornoncontrolling ~~45.2%,~~interests ~~to $1.7 million for the six months ended June 30, 2005 from $3.1 million~~ in ~~the~~a ~~comparable~~subsidiary ~~2004 period. For 2005, gross realized investment gains~~ and ~~(losses)~~for ~~were~~deconsolidation ~~$9.3~~of ~~million~~a ~~and $(7~~subsidiary.6) ~~million,~~SFAS ~~respectively~~No. 160 ~~For~~will ~~2004,~~be ~~gross~~effective ~~realized gains~~for ~~and~~us ~~(losses)~~on ~~were~~January 1, ~~$5.4~~2009 ~~million~~ and ~~$(2.3)~~will be ~~million,~~applied ~~respectively.~~prospectively ~~Impairment losses recognized~~ as ~~part~~ of ~~gross realized losses in~~ the ~~six~~effective ~~months~~date. We ~~ended~~do ~~June~~not ~~30,~~expect ~~2005~~SFAS ~~were $3~~No.9 160 ~~million.~~to ~~There~~have ~~were~~a nomaterial ~~impairment~~impact ~~losses~~on ~~recognized~~our inconsolidated ~~the~~financial ~~six month period ended June 30, 2004~~statements.

~~Premiums decreased $1.2 million, or 2.~~3~~%, to $51~~.3 ~~million~~Investments ~~for~~and ~~the~~Derivative ~~six~~Instruments months ended June 30, 2005 from $52.5 million in the comparable 2004 period. The decrease was primarily attributable to a $2.4 million decline in premiums from runoff blocks of life policies, partially offset by a $1.1 million increase primarily from our Medicare supplement products.

~~Cost~~Investments of insurance increased $2.2 million, or 3.1%, to $73.0 million for the six months ended June 30, 2005 from $70.8 million in the comparable 2004 period. The increase was primarily attributable to a $1.2 million increase related to product guarantees on new variable annuity business.

~~Variable~~As ~~product~~of ~~fees~~March 31, ~~increased~~2008, ~~$5.4 million to $9.0 million for~~ the ~~six~~amortized ~~months~~cost ~~ended~~or ~~June 30~~cost, ~~2005~~gross ~~from~~unrealized ~~$3.6~~gains ~~million~~(losses) inand ~~the~~estimated ~~comparable~~fair ~~2004~~value ~~period.~~of ~~The~~our ~~increase~~fixed ~~was~~maturity ~~primarily~~and ~~attributable to higher~~equity ~~levels~~securities ofclassified inas available-~~force~~for-sale ~~variable~~were ~~annuity~~as ~~products.~~follows:

Other income increased $3.7 million, or 35.6%, to $14.1 million for the six months ended June 30, 2005 from $10.4 million in the comparable 2004 period. The increase was primarily the result of a $3.1 million increase in surrender and other fees attributable to growth of in-force variable annuity products.


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	211.3	$	24.4	$	(0.1	)	$	235.6
Tax exempt		13.1		—		(0.1	)		13.0
Government—non U.S.		290.3		24.5		(4.0	)		310.8
U.S. corporate		6,900.5		105.7		(354.4	)		6,651.8
Corporate—non U.S.		1,868.6		9.7		(132.9	)		1,745.4
Mortgage and asset-backed		6,194.9		23.5		(821.0	)		5,397.4

Total fixed maturity securities		15,478.7		187.8		(1,312.5	)		14,354.0
Equity securities		63.8		0.4		(1.6	)		62.6

Total available-for-sale securities	$	15,542.5	$	188.2	$	(1,314.1	)	$	14,416.6

~~Interest~~As ~~credited~~of ~~decreased $9.3 million~~December 31, ~~or 6.3%~~2007, ~~to $138.1 million in~~ the ~~six~~amortized ~~months~~cost ~~ended~~or ~~June 30~~cost, ~~2005~~gross ~~from~~unrealized ~~$147.4~~gains ~~million~~(losses) ~~in the comparable 2004 period. The decrease was primarily due to a $4.2 million decline~~and ~~attributable~~estimated tofair avalue ~~runoff block~~ of ~~life products and a $4.0 million decline attributable to a decline of~~ our ~~GICs~~fixed maturity and ~~funding~~equity ~~agreements~~securities ~~partially~~classified ~~offset~~as byavailable-for-sale ~~higher~~were ~~average~~as ~~crediting~~follows: ~~rates. Also contributing to the decrease was a $1.4 million decline resulting from a decline of our fixed deferred annuities.~~

Benefits and other changes in policy reserves increased $6.2 million, or 6.4%, to $102.4 million in the six months ended June 30, 2005 from $96.2 million in the comparable 2004 period. The increase was primarily due to a $3.6 million increase attributable to unfavorable mortality for life products and a $1.8 million increase primarily attributable to higher levels of in-force annuities and an $0.8 million increase primarily attributable to Medicare supplement products.


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	189.3	$	18.0	$	(0.1	)	$	207.2
Government—non U.S.		293.0		28.1		(1.4	)		319.7
U.S. corporate		6,983.1		99.6		(207.3	)		6,875.4
Corporate—non U.S.		1,881.6		9.5		(79.7	)		1,811.4
Mortgage and asset-backed		6,398.4		25.7		(400.5	)		6,023.6

Total fixed maturity securities		15,745.4		180.9		(689.0	)		15,237.3
Equity securities		60.5		3.6		(0.1	)		64.0

Total available-for-sale securities	$	15,805.9	$	184.5	$	(689.1	)	$	15,301.3

~~Underwriting,~~GENWORTH ~~acquisition~~LIFE ~~and~~AND ~~insurance~~ANNUITY ~~expenses,~~INSURANCE ~~net~~COMPANY of deferrals increased $12.0 million, or 34%, to $47.3 million in the six months ended June 30, 2005 from $35.3 million in the comparable 2004 period. The increase was primarily attributable to a $12.0 million increase in legal fees for the six months ended June 30, 2005.

~~Amortization~~NOTES ofTO ~~deferred~~CONDENSED ~~acquisition~~CONSOLIDATED ~~costs~~FINANCIAL ~~and~~STATEMENTS—(Continued) intangibles decreased $64.2 million, or 82.4%, to $13.7 million for the six months ended June 30, 2005, from $77.9 million in the comparable 2004 period. The decrease was primarily attributable to a $59.8 million goodwill impairment charge in the six months ended June 30, 2004 resulting from the reinsurance transactions with UFLIC. Also contributing to the decrease was a $4.5 million decline related primarily to the amortization offset as a result of higher mortality experience on universal life policies in the six months ended June 30, 2005 when compared to the six months ended June 30, 2004 and lower amortization on our whole life block currently in runoff.

~~Provision~~ (~~benefit~~Unaudited) for income taxes increased $170.9 million to an expense of $11.1 million for the six months ended June 30, 2005 from a benefit of $159.8 million for the six months ended June 30, 2004. The increase in tax provision was primarily attributable to the tax benefit associated with the reinsurance transactions with UFLIC in the six months ended June 30, 2004, partially offset by favorable examination developments in the six months ended June 30, 2005.

~~Earnings~~The ~~before~~following ~~cumulative~~table ~~effect~~presents ~~of change in accounting principle decreased $114.5 million, or 73.0%, to $42.4 million for~~ the ~~six~~gross ~~months ended~~unrealized ~~June~~losses ~~30,~~and ~~2005~~estimated ~~from~~fair ~~$156.9~~values ~~million~~of ~~in the comparable 2004 period. The decrease was primarily attributable to a $183.6 million decline in~~ our ~~Corporate and Other segment~~investment securities, ~~partially~~aggregated ~~offset~~ by ainvestment ~~$65.7~~type ~~million increase in our Retirement Income~~ and ~~Investments~~ ~~segment~~length ~~and~~of atime ~~$3.4~~that ~~million~~individual ~~increase~~investment insecurities ~~our~~have ~~Protection~~been ~~segment. The decrease~~ in ~~our~~a ~~Corporate~~continuous ~~and~~unrealized ~~Other~~loss ~~segment is primarily attributable to the tax benefit associated with the reinsurance transactions with UFLIC in the six months ended June 30~~position, ~~2004.~~as ~~The~~of ~~increase in our Retirement Income and Investments segment was primarily attributable to a goodwill impairment charge in the six months ended June 30~~March 31, ~~2004~~2008: ~~resulting from the reinsurance transactions with UFLIC.~~

Financial Condition


	Less Than 12 Months						12 Months or More
(Dollar amounts in millions)	Estimated fair value		Gross unrealized losses			# of securities	Estimated fair value		Gross unrealized losses			# of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	6.6	$	(0.1	)	3	$	—	$	—		—
State municipal		13.0		(0.1	)	1		—		—		—
Government—non U.S.		46.3		(4.0	)	22		—		—		—
U.S. corporate		2,401.3		(178.5	)	372		1,365.7		(175.9	)	241
Corporate—non U.S.		949.7		(80.7	)	138		416.3		(52.2	)	59
Asset-backed		2,113.9		(244.4	)	247		930.8		(191.3	)	150
Mortgage-backed		1,367.2		(230.8	)	288		501.6		(154.5	)	160

Subtotal, fixed maturity securities		6,898.0		(738.6	)	1,071		3,214.4		(573.9	)	610
Equity securities		32.8		(1.2	)	4		0.8		(0.4	)	3

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613

% Below cost—fixed maturity securities:
<20% Below cost	$	6,406.4	$	(427.4	)	917	$	2,723.6	$	(272.9	)	451
20-50% Below cost		418.3		(164.6	)	113		429.6		(170.3	)	113
>50% Below cost		73.3		(146.6	)	41		61.2		(130.7	)	46

Total fixed maturity securities		6,898.0		(738.6	)	1,071		3,214.4		(573.9	)	610

% Below cost—equity securities:
<20% Below cost		32.8		(1.2	)	4		0.8		(0.4	)	3
>50% Below cost		—		—		—		—		—		—

Total equity securities		32.8		(1.2	)	4		0.8		(0.4	)	3

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613


Investment grade	$	6,600.6	$	(703.5	)	960	$	3,097.6	$	(552.1	)	568
Below investment grade		330.2		(36.3	)	115		117.6		(22.2	)	45

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613

~~Total~~The ~~investments.~~investment ~~Total~~securities ~~investments~~in ~~decreased~~an ~~$937.1~~unrealized ~~million~~loss position as of March 31, or2008 ~~10.6%~~consisted of 1,688 tosecurities accounting for unrealized losses of $71,~~913~~314.51 million. atOf ~~June~~these ~~30,~~unrealized ~~2005 from~~losses of $81,~~850~~314.61 million, at95.5% ~~December~~were ~~31,~~investment ~~2004~~grade (rated AAA through BBB-) and 53.4% were less than 20% below cost. The ~~decrease~~amount of the unrealized loss on these securities was primarily ~~attributable~~attributed to awidening ~~decline~~credit inspreads ~~investments~~during ~~supporting~~2008, ~~GICs~~particularly in our sub-prime and ~~funding~~Alt-A ~~agreement~~residential ~~liabilities~~mortgage and asset-backed securities. ~~GICs~~Of ~~and~~the ~~funding~~investment ~~agreement~~securities ~~liabilities~~in ~~decreased~~an byunrealized ~~$866.5~~loss ~~million,~~position ~~which~~for ~~resulted~~twelve months ~~from~~or ~~scheduled~~more ~~maturities~~as ~~and~~of ~~management~~March 31, ~~strategy~~2008, of15 ~~reducing~~securities ~~floating-rate~~were ~~funding~~20% ~~agreements.~~or ~~Also~~more ~~contributing~~below tocost ~~the~~and ~~decrease~~below ininvestment ~~total~~grade ~~investments~~(rate ~~was~~BB+ aand ~~$41.3~~below) ~~million~~for ~~decline~~twelve inmonths or more. These securities ~~lending~~accounted for unrealized losses of $12.7 million.

Investment securities comprise mainly investment grade debt securities. Investment securities were $6,251.3 million, including gross unrealized gains and (losses) of $176.2 million and $(25.7) million, respectively at June 30, 2005 and $7,028.0 million, including gross unrealized gains and (losses) of $192.6 million and $(41.2) million, respectively, at December 31, 2004.

We regularly review investment securities for impairment based on criteria that includes the extent to which cost exceeds market value, the duration of that market decline, and the financial health and specific prospects for the issuer. Impairment losses recognized in the six month period ended June 30, 2005 were $3.9 million. There were no impairment losses recognized in the six month period ended June 30, 2004.

We engage in certain securities lending transactions, which require the borrower to provide collateral, primarily consisting of cash and government securities, on a daily basis, in amounts equal to or exceeding 102% of the fair value of the applicable securities loaned. We maintain effective control over all loaned securities and, therefore, continue to report such securities as fixed maturities in the Condensed, Consolidated Statements of Financial Position.

Collateral received on securities lending transactions is recorded in other invested assets with an offsetting liability recognized in other liabilities for the obligation to return the collateral. The fair value of collateral held and included in other invested assets was $365.6 million and $406.9 million at June 30, 2005 and December 31, 2004, respectively.

~~Future~~GENWORTH ~~annuity~~LIFE ~~and~~AND ~~contract~~ANNUITY ~~benefits.~~INSURANCE ~~Future~~COMPANY annuity and contract benefits decreased $1,011.8 million, or 10.5%, to $8,592.8 million at June 30, 2005 from $9,604.6 million at December 31, 2004. The decrease was primarily attributable to a $866.5 million decline in GICs and funding agreements, which resulted from scheduled maturities and management strategy of reducing floating-rate funding agreements. The decrease was also attributable to a $96.9 million decline in future annuity and contract benefits related to the general account portion of a reinsured block of variable annuity products and a $38.1 million decrease attributable to a runoff block of deferred annuities.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

As of March 31, 2008, we expect these investments to continue to perform with their original contractual terms and we have the ability and intent to hold these investment securities until the recovery of the fair value up to the cost of the investment, which may be at maturity. Accordingly, we do not consider these investments to be other-than-temporarily impaired as of March 31, 2008. However, from time to time, our intent on an individual security may change, based upon market or other unforeseen developments. In such instances, we sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield and liquidity requirements.

Derivative instruments

The fair value of derivative instruments is based upon either prices obtained from an independent third party or pricing valuation models utilizing market inputs obtained from an independent third party. The following table sets forth our positions in derivative instruments and the estimated fair values as of the dates indicated:


	March 31, 2008						December 31, 2007
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets		Liabilities
Interest rate swaps	$	3,184.7	$	142.5	$	49.7	$	2,513.7	$	73.8	$	24.4
Equity index options		1,037.7		190.0		—		877.6		115.6		—
Limited guarantee		250.0		30.0		—		250.0		23.9		—
Financial futures		189.2		—		—		12.5		—		—
Credit default swaps		56.1		—		0.7		—		—		—

Total derivatives	$	4,717.7	$	362.5	$	50.4	$	3,653.8	$	213.3	$	24.4

The fair value of derivative assets was recorded in other invested assets and the fair value of derivative liabilities was recorded in other liabilities. As of March 31, 2008 and December 31, 2007, the fair value included $244.8 million and $150.9 million, respectively, of derivative assets and $32.5 million and $14.5 million, respectively, of derivative liabilities that do not qualify for hedge accounting.

4. Fair Value Measurement

As defined in SFAS No. 157, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold fixed maturity and equity securities, trading securities, derivatives, embedded derivatives, securities held as collateral, separate account assets and certain other financial instruments, which are carried at fair value.

Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS No. 157 requires all assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

•

Level 1—Quoted prices for identical instruments in active markets.

•

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•

Level 3—Instruments whose significant value drivers are unobservable.

GENWORTH LIFE AND ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded derivatives and actively traded mutual fund investments.

Level 2 includes those financial instruments that are valued by independent pricing services or valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various inputs, such as interest rate, credit spread and foreign exchange rates for the underlying financial instruments. All significant inputs are observable, or derived from observable, information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include: certain public and private corporate fixed maturity and equity securities; government or agency securities; certain mortgage and asset-backed securities; securities held as collateral; and certain non-exchange-traded derivatives such as interest rate swaps.

Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices or internally developed models or methodologies utilizing significant inputs not based on, or corroborated by, readily available market information. This category primarily consists of certain less liquid fixed maturity, equity and trading securities and certain derivative instruments where we cannot corroborate the significant valuation inputs with market observable data.

At each reporting period, all assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability, such as the relative impact on the fair value as a result of including a particular input.

The vast majority of our fixed maturity and equity securities use Level 2 inputs for the determination of fair value. These fair values are obtained primarily from independent pricing services, when available, utilizing Level 2 inputs. Where pricing services do not provide fair values, internally developed pricing models produce estimates of fair value primarily utilizing Level 2 inputs along with certain Level 3 inputs. The internally developed models include matrix pricing where we discount expected cash flows utilizing market interest rates obtained from third-party sources based on the credit quality and duration of the instrument to determine fair value. For securities that may not be reliably priced using internally developed pricing models, broker quotes are obtained. These broker quotes represent an exit price but the assumptions used to establish the fair value may not be observable and represent Level 3 inputs.

The fair value of securities held as collateral is primarily based on Level 2 inputs by third parties for the collateral that is held on our behalf by the custodian. The fair value of separate account assets is based on the quoted prices of the underlying fund investments and, therefore, represents Level 1 pricing.

As discussed above, the classification of fair value measurements for derivative instruments, including embedded derivatives requiring bifurcation, is determined based on consideration of several inputs including: closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options; market interest rates; and non-performance risk. For product-related embedded derivatives, we also include certain policyholder assumptions in the determination of fair value.

GENWORTH LIFE AND ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table sets forth our assets that are measured at fair value on a recurring basis as of the date indicated:


	March 31, 2008
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Investments:
Fixed maturity securities, available-for-sale	$	14,354.0	$	—	$	12,279.6	$	2,074.4
Equity securities, available-for-sale		62.6		14.8		43.2		4.6
Other invested assets^(a)		1,045.8		—		726.5		319.3
Separate account assets		11,343.9		11,343.9		—		—

Total assets	$	26,806.3	$	11,358.7	$	13,049.3	$	2,398.3

^(a)	Includes derivatives, trading securities, restricted other invested assets and securities held as collateral.

The following table sets forth our liabilities that are measured at fair value on a recurring basis as of the date indicated:


	March 31, 2008
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Policyholder account balances^(a)	$	102.7	$	—	$	—	$	102.7
Other liabilities^(b)		50.4		—		50.4		—

Total liabilities	$	153.1	$	—	$	50.4	$	102.7

^(a)	Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

^(b)	Represents derivative instruments.

For assets carried at fair value, the credit standing of the counterparties is considered in the determination of fair value measurement for those assets. The fair value measurement of a liability must reflect the nonperformance risk of the entity. Therefore, the impact of credit standing, as well as any potential credit enhancements (e.g., collateral), has been considered in the fair value measurement of both assets and liabilities.

The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value:


(Amounts in millions)	Fixed maturity securities, available-for- sale			Equity securities, available-for- sale			Other invested assets^(a)			Total
Beginning balance as of December 31, 2007	$	2,044.2		$	5.1		$	227.2		$	2,276.5
Total realized and unrealized gains (losses):
Included in net income		(16.0	)		0.8			46.3			31.1
Included in other comprehensive income (loss)		(161.8	)		—			(0.4	)		(162.2	)
Purchases, sales, issuances and settlements, net		14.2			(1.3	)		52.9			65.8
Transfers in (out) of Level 3		193.8			—			(6.7	)		187.1

Ending balance as of March 31, 2008	$	2,074.4		$	4.6		$	319.3		$	2,398.3

Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held as of the reporting date	$	(16.0	)	$	—		$	46.3		$	30.3

^(a)	Includes trading securities, restricted other invested assets and certain derivatives.

GENWORTH LIFE AND ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table presents additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value:


(Amounts in millions)	Policyholder account balances^(a)
Beginning balance as of December 31, 2007	$	30.3
Total realized and unrealized (gains) losses:
Included in net income		69.4
Included in other comprehensive income (loss)		—
Purchases, sales, issuances and settlements, net		3.0
Transfers in (out) of Level 3		—

Ending balance as of March 31, 2008	$	102.7

Amount of total (gains) losses for the period included in net income attributable to the change in unrealized (gains) losses relating to liabilities still held as of the reporting date	$	69.5

^(a)	Includes product-related embedded derivatives.

Realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net investment gains (losses) within the consolidated statements of income or other comprehensive income (loss) within stockholder’s equity based on the appropriate accounting treatment for the instrument.

Purchases, sales, issuances and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily consists of purchases and sales of fixed maturity, equity and trading securities and purchases and settlements of derivative instruments.

The purchases, sales, issuances and settlements, net, activity presented for policyholder account balances represents the issuances and settlements of product-related embedded derivatives where: issuances are characterized as the change in fair value associated with the product fees recognized that are attributed to the embedded derivative to equal the expected future benefit costs upon issuance; and settlements are characterized as the change in fair value upon exercising the embedded derivative instrument, effectively representing a settlement of the embedded derivative instrument. We have shown these changes in fair value separately based on the classification of this activity as effectively issuing and settling the embedded derivative instrument with all remaining changes in the fair value of these embedded derivative instruments being shown separately in the category labeled “included in net income” in the table presented above. However, due to the characteristics of these embedded derivatives, the total change in fair value was reflected in income for the period.

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.

The amount presented for unrealized gains (losses) for assets and liabilities still held as of the reporting date primarily represents impairments for available-for-sale securities, changes in fair value of trading securities and certain derivatives, and changes in fair value of certain product-related embedded derivatives that exist as of the reporting date, which were recorded in net investment gains (losses).

GENWORTH LIFE AND ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

As of March 31, 2008, there were no assets or liabilities measured at fair value on a non-recurring basis in periods subsequent to initial recognition.

5. Commitments and Contingencies

(a) Litigation

We face the risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. Plaintiffs in class action and other lawsuits against us may seek indeterminate amounts which may remain unknown for substantial periods of time. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer reputational harm, which could have an adverse effect on our business, financial condition or results of operations. At this time, it is not feasible to predict, nor to determine the ultimate outcomes of all pending investigations and legal proceedings, nor to provide reasonable ranges of potential losses.

(b) Commitments

As of March 31, 2008, we were committed to fund $1.3 million in commercial mortgage loan investments and $167.4 million in limited partnership investments.

(c) Guarantees

We guaranteed the payment of certain structured settlement benefits sold by Assigned Settlement, Inc., our wholly-owned subsidiary, from March 2004 through December 2005 that were funded by products of our parent and one of our affiliates. The structured settlement reserves related to this guarantee were $275.2 million as of March 31, 2008.

6. Non-recourse Funding Obligations

As of March 31, 2008, we had $3.6 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves, of which, $1.7 billion were guaranteed by third-party financial guaranty insurance companies. The interest rates on these obligations are subject to rate resets triggered by negative rating agency action on the third-party financial guaranty insurance companies that guaranteed these obligations. In January 2008, the maximum rate on $1.2 billion of the $1.7 billion of non-recourse funding obligations was contractually reset to a higher rate due to the third-party financial guaranty insurance company that guaranteed these obligations being placed on credit watch. However, in February 2008, the credit ratings for that guarantor were reaffirmed which lowered the interest rate from the January 2008 reset rate. In February 2008, the rate was reset from the December 2007 rate on the remaining $0.5 billion to the highest contractual rate due to further downgrades on the third-party financial guaranty insurance company of those obligations.

As of March 31, 2008 and December 31, 2007, the weighted average interest rate on our non-recourse funding obligations was 3.7% and 5.8%, respectively.

GENWORTH LIFE AND ANNUITY INSURANCE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

7. Segment Information

We conduct our operations in two operating business segments: (1) Protection, which includes term and universal life insurance and Medicare supplement insurance, and (2) Retirement Income and Institutional, which principally includes fixed and variable deferred and immediate individual annuities, group variable annuities offered through retirement plans, variable life insurance and institutional products. Institutional products include FABNs, funding agreements and GICs. We also have Corporate and Other activities which include income and expenses not allocated to the segments.

We use the same accounting policies and procedures to measure segment net income and assets as we use to measure our consolidated net income and assets. Segment net income represents the basis on which the performance of our business is assessed by management.

The following is a summary of our segments and Corporate and Other activities for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2008			2007
Revenues:
Protection	$	436.0		$	443.0
Retirement Income and Institutional		166.9			208.0
Corporate and Other		7.0			6.5

Total revenues	$	609.9		$	657.5


Net income (loss):
Protection	$	59.9		$	69.4
Retirement Income and Institutional		(6.1	)		19.2
Corporate and Other		(0.3	)		4.9

Net income	$	53.5		$	93.5

The following is a summary of total assets for our segments and Corporate and Other activities as of the periods indicated:


(Amounts in millions)	March 31, 2008		December 31, 2007
Assets:
Protection	$	15,063.4	$	14,880.0
Retirement Income and Institutional		28,457.1		29,456.7
Corporate and Other		1,396.8		1,640.4

Total assets	$	44,917.3	$	45,977.1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein.

Cautionary note regarding forward-looking statements

This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including the following:

•

Risks relating to our businesses, including interest rate fluctuations, downturns and volatility in equity and credit markets, downgrades in our financial strength or credit ratings, insufficiency of reserves, competition, availability and adequacy of reinsurance, defaults by counterparties, regulatory restrictions on our operations and changes in applicable laws and regulations, legal or regulatory investigations or actions, the failure or any compromise of the security of our computer systems, the occurrence of natural or man-made disasters or disease pandemic, unexpected changes in mortality, accelerated amortization of deferred acquisition costs and present value of future profits, goodwill impairments, medical advances such as genetic mapping research, unexpected changes in persistency rates and increases in statutory reserve requirements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

Overview

Our business

We are one of a number of subsidiaries of Genworth Financial, Inc. (“Genworth”), a leading financial security company in the U.S., with an expanding international presence. We have two operating segments: (1) Protection and (2) Retirement Income and Institutional.

•

Protection. We offer customers term and universal life insurance and Medicare supplement insurance.

•

Retirement Income and Institutional. We offer customers a variety of wealth accumulation, income distribution and institutional products. Wealth accumulation and income distribution products principally include fixed and variable deferred and immediate individual annuities and group variable annuities offered through retirement plans. Institutional products include funding agreements backing notes (“FABNs”), funding agreements and guaranteed investment contracts (“GICs”).

We also have Corporate and Other activities which include income and expenses not allocated to the segments.

Business trends and conditions

In recent years, our business has been, and we expect will continue to be, influenced by a number of industry-wide and product-specific trends and conditions. The discussion of business trends and conditions should be read together with the trends contained in our 2007 Annual Report on Form 10-K, which described additional business trends and conditions.

General conditions and trends affecting our businesses

Volatility in credit markets. Credit markets continue to experience reduced liquidity, higher volatility and widening credit spreads across asset classes mainly as a result of marketplace uncertainty arising from higher defaults in sub-prime and Alt-A residential mortgage loans. In connection with this uncertainty, we believe investors and lenders have retreated from many investments in asset-backed securities including those associated with sub-prime and Alt-A residential mortgage loans, as well as types of debt investments with weak lender protections or those with limited transparency and/or complex features which hindered investor understanding. At the same time, investors shifted emphasis towards safety pushing up the demand for U.S. Treasury instruments. We believe the current credit market conditions contributed to an increase in net unrealized investment losses of $616.6 million, before tax and other offsets, during 2008 in our $14,354.0 million investment portfolio of fixed maturity securities reflecting widening spreads in our mortgage and asset-backed securities, partially offset by the effects of a lower risk-free interest rate environment. We also believe these credit market conditions have contributed to a higher level of impairments on our investment portfolio. We expect to experience continued volatility in the valuation of our fixed maturity securities, as well as a generally higher level of credit-related investment losses including additional impairments on our investment portfolio. We believe, however, that the current credit environment also provides us with opportunities to invest in select asset classes and sectors that may enhance our investment yields over time. See “—Investments and Derivative Instruments” for additional information on our investment portfolio. In addition, a weakening in the economic environment could lead to increased credit defaults.

The current credit market conditions resulted in an unfavorable liquidity environment for issuers of financial instruments including non-recourse funding obligations, commercial paper, long-term debt and asset-backed securities. Credit spreads widened for many corporate issuers of commercial paper and long-term debt resulting in less favorable financing terms. This unfavorable liquidity environment did not have a material effect on our financing activities during the quarter ended March 31, 2008.

See additional trends related to volatile credit markets in the “—Trends and conditions affecting our products” which follows.

Trends and conditions affecting our products

Life insurance. Results in our life insurance business are impacted by sales, mortality, persistency, investment yields and statutory reserve requirements. Additionally, sales of our products and persistency of our insurance in-force are dependent on competitive product features and pricing, distribution penetration and customer service. During 2007, as a result of a competitive pricing environment, we experienced lower sales and lower persistency in term life insurance policies coming out of their post-level rate period (10 and 15 years after policy issue). We expect these trends to continue, in general, as we maintain pricing discipline in the current competitive pricing environment, but we will work actively to address market segments with stronger sales potential and try to mitigate lapse risk associated with policies coming out of guaranteed premium periods.

We have also experienced a shift in focus by our distributors from term life insurance to universal life insurance products. In response to this shift in focus by our distributors, we are building out our universal life insurance capabilities and maintaining a disciplined approach to term life insurance pricing.

Regulations XXX and AXXX require insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and certain universal life insurance policies with secondary guarantees, which increase the capital required to write these products. For term life insurance and certain universal life insurance, we have implemented capital management actions to reduce the capital impact of these regulations. Several competitors have taken capital management actions similar to ours in response to Regulations XXX and AXXX. Recent market conditions impacting securitization transactions may impact future life sales insurance which will necessitate our need to pursue alternative structures such as reinsurance and lines of credit.

As of March 31, 2008, we had $3.6 billion of fixed and floating rate non-recourse funding obligations outstanding backing these additional statutory reserves, of which, $1.7 billion were guaranteed by third-party financial guaranty insurance companies. The interest rates on these obligations are subject to rate resets triggered by negative rating agency action on the third-party financial guaranty insurance companies that guaranteed these obligations. During 2007 and 2008, the rates on those $1.7 billion of non-recourse funding obligations were contractually reset to higher rates and continue to be subject to rate resets. We do not believe that these increases will have a material impact on our consolidated financial statements. To maintain and optimize product returns, we may, at our discretion, seek alternative, and potentially more costly, financing terms in the future depending upon market conditions.

Retirement products. Results for our retirement income products within our Retirement Income and Institutional segment are affected by investment performance, interest rate levels, slope of the interest rate yield curve, net interest spreads, equity market fluctuations, mortality, policyholder lapses and new product sales. Our competitive position within many of our distribution channels and our ability to retain business depends significantly upon product features, including current and minimum crediting rates on spread-based products relative to our competitors, surrender charge periods in our annuities, as well as guaranteed features we offer in variable products. We actively evaluate our competitive position based upon each of those features, and where possible, we make adjustments as appropriate to meet our target return thresholds.

We maintain our focus on our Income Distribution Series of variable annuity products. We have seen a decline in defined benefit retirement plans in favor of defined contribution plans with more of the responsibility for retirement income planning falling on the individual. Additionally, U.S. savings rates are at historical lows. We believe these factors support demand for individual and group retirement income products that provide various forms of guaranteed benefits with the opportunity to realize upside market performance. Our Income Distribution Series provides the contractholder with the ability to receive a guaranteed minimum income stream that they cannot outlive, along with an opportunity to participate in market appreciation. However, through various techniques, these products are designed to reduce some of the risks that generally accompany traditional products with guaranteed living benefits. We are targeting individuals who are focused on building a personal portable retirement plan or are moving from the accumulation to the distribution phase of their retirement planning.

Institutional. Results in our institutional business are affected by credit markets. During 2007 and the first quarter of 2008, credit markets experienced reduced liquidity, higher volatility and widening credit spreads across asset classes. Our ability to issue funding agreements, FABNs and GICs to institutional investors is primarily dependent upon the credit markets, market perception of credit and risk-based pricing and our credit default swaps. We view this business as opportunistic and, therefore, new origination activity may vary considerably period to period. The current credit market conditions made these types of products for large institutional investors less attractive compared to alternative products offering higher yields with more liquidity.

Certain of our FABNs and funding agreements offer contractholders the option to make periodic elections to extend their maturity date. As a result of the current credit market conditions, certain contractholders have elected not to extend their contracts. We do not believe that this trend will have a material effect on our financial position or liquidity.

In December 2007, we began issuing FABNs to retail investors and believe the current credit market conditions will not significantly impact sales to our retail investors.

Consolidated Results of Operations

In addition to measuring revenues, net income and assets in terms of operating performance, management also monitors and reports sales and insurance in-force metrics each period.

Management regularly monitors and reports sales metrics as a measure of volume of new and renewal business generated in a period. Sales refers to: (1) annualized first-year premiums for term life insurance and Medicare supplement insurance; and (2) new and additional premiums/deposits for universal life insurance, fixed annuities, institutional products and variable products. Sales do not include renewal premiums on policies or contracts written during prior periods. We consider annualized first-year premiums and new premiums/deposits to be measures of our operating performance because they represent measures of new sales of insurance policies or contracts during a specified period, rather than measures of our revenues or profitability during that period.

Management regularly monitors and reports insurance in-force. Insurance in-force for our life insurance is a measure of the aggregate face value of outstanding insurance policies as of the respective reporting date. We consider insurance in-force to be a measure of our operating performance because it represents a measure of the size of our business at a specific date, rather than a measure of our revenues or profitability during that period.

These operating measures enable us to compare our operating performance across periods without regard to revenues or profitability related to policies or contracts sold in prior periods or from investments or other sources.

The following discussions of our results of operations should be read in conjunction with the “—Business trends and conditions.”

Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

The following table sets forth our consolidated results of operations for the periods indicated:


(Amounts in millions)	Three months ended March 31,						Increase (decrease) and percentage change
	2008			2007			2008 vs. 2007
Revenues:
Premiums	$	268.6		$	255.9		$	12.7		5.0	%
Net investment income		271.2			285.3			(14.1	)	(4.9	)%
Net investment gains (losses)		(65.2	)		(1.6	)		(63.6	)	NM	⁽¹⁾
Policy fees and other income		135.3			117.9			17.4		14.8	%

Total revenues		609.9			657.5			(47.6	)	(7.2	)%

Benefits and expenses:
Benefits and other changes in policy reserves		265.4			265.0			0.4		0.2	%
Interest credited		125.3			129.8			(4.5	)	(3.5	)%
Acquisition and operating expenses, net of deferrals		60.8			49.7			11.1		22.3	%
Amortization of deferred acquisition costs and intangibles		31.6			40.7			(9.1	)	(22.4	)%
Interest expense		46.1			42.0			4.1		9.8	%

Total benefits and expenses		529.2			527.2			2.0		0.4	%

Income before income taxes and equity in net income (loss) of unconsolidated subsidiary		80.7			130.3			(49.6	)	(38.1	)%
Provision for income taxes		25.3			41.7			(16.4	)	(39.3	)%

Net income before equity in net income (loss) of unconsolidated subsidiary		55.4			88.6			(33.2	)	(37.5	)%
Equity in net income (loss) of unconsolidated subsidiary		(1.9	)		4.9			(6.8	)	(138.8	)%

Net income	$	53.5		$	93.5		$	(40.0	)	(42.8	)%

⁽¹⁾	We define “NM” as not meaningful for increases or decreases greater than 200%.

Premiums. Premiums consist primarily of premiums earned on individual life insurance, Medicare supplement insurance, single premium immediate annuities and structured settlements with life contingencies.

•

Our Protection segment increased $12.2 million driven largely by in-force growth from new sales and renewal premiums in term life insurance, partially offset by a decrease in Medicare supplement insurance as lapses exceeded new sales.

•

Our Retirement Income and Institutional segment increased $0.5 million primarily as a result of increased life-contingent single premium immediate annuity sales, partially offset by a decrease in our structured settlement annuities which are in runoff.

Net investment income. Net investment income represents the income earned on our investments.

•

Our Protection segment decreased $2.6 million mainly due to lower yields on assets backing our non-recourse funding obligations supporting certain term and universal life insurance reserves.

•

Our Retirement Income and Institutional segment decreased $10.6 million mainly attributable to lower yields on floating rate investments supporting certain floating rate policyholder liabilities related to our institutional products and a decrease related to deferred annuities from a decline in average invested assets and yields.

•

Corporate and other activities decreased $0.9 million attributable to lower income from surplus assets.

Net investment gains (losses). Net investment gains (losses) consist of realized gains and (losses) from the sale or impairment of our investments, unrealized and realized gains and (losses) from our trading securities, fair value hedging relationships, non-qualifying derivatives and embedded derivatives. We incurred $44.2 million of impairments during the three months ended March 31, 2008, of which $35.7 million related to securities backed by sub-prime and Alt-A residential mortgage-backed and asset-backed securities. Net investment losses from derivatives were primarily a result of the change in value of derivative instruments used for risk management of variable annuity guaranteed minimum withdrawal benefits not fully offsetting the corresponding changes in the embedded liability during the first quarter of 2008. For further discussion of the change in net investment gains (losses), see the comparison for this line item under “—Investments and Derivative Instruments.”

Policy fees and other income. Policy fees and other income consist primarily of fees assessed against policyholder and contractholder account values, cost of insurance and surrender charges assessed on universal life insurance policies and other fees.

•

Our Protection segment increased $3.1 million largely attributable to increased sales of universal life insurance.

•

Our Retirement Income and Institutional segment increased $14.3 million principally from increased assets under management from continued sales of our variable annuities, primarily our Income Distribution Series.

Benefits and other changes in policy reserves. Benefits and other changes in policy reserves consist primarily of benefits paid and reserve activity related to current claims and future policy benefits on insurance and investment products for life insurance, Medicare supplement insurance and structured settlements and single premium immediate annuities with life contingencies.

•

Our Protection segment decreased $4.0 million principally driven by higher terminations and favorable claims experience in our Medicare supplement insurance.

•

Our Retirement Income and Institutional segment increased $4.4 million mainly resulting from increased life-contingent single premium immediate annuity sales.

Interest credited. Interest credited represents interest credited on behalf of policyholder and contractholder general account balances.

•

Our Protection segment increased $1.2 million mainly as a result of growth in assets under management in universal life insurance.

•

Our Retirement Income and Institutional segment decreased $5.7 million primarily from our institutional products as lower short-term rates have impacted interest paid on our floating rate policyholder liabilities. Our spread-based products also decreased as a result of lower account values on fixed annuities associated with surrenders more than offsetting sales and crediting rates being reset to current, lower rates as the fixed annuities reach the end of their initial crediting rate guarantee period.

Acquisition and operating expenses, net of deferrals. Acquisition and operating expenses, net of deferrals, represent costs and expenses related to the acquisition and ongoing maintenance of insurance and investment contracts, including commissions, policy issuance expenses and other underwriting and general operating costs. These costs and expenses are net of amounts that are capitalized and deferred, which are primarily costs and expenses that vary with and are primarily related to the sale and issuance of our insurance policies and investment contracts, such as first-year commissions in excess of ultimate renewal commissions and other policy issuance expenses.

•

Our Protection segment increased $12.4 million primarily due to lower commission allowances related to an affiliated reinsurance agreement and higher allocated expenses.

•

Corporate and other activities decreased from lower amortization of loan origination fees and costs associated with commercial mortgage loans driven by a system correction in the fourth quarter of 2007.

Amortization of deferred acquisition costs and intangibles. Amortization of deferred acquisition costs and intangibles consist primarily of the amortization of acquisition costs that are capitalized, present value of future profits, capitalized software and goodwill impairments.

•

Our Protection segment decreased $5.6 million primarily from lower amortization related to our universal life insurance product from a prior year adjustment.

•

Our Retirement Income and Institutional segment decreased $3.5 million from lower amortization as a result of hedge losses related to our guaranteed minimum withdrawal benefit product that was partially offset by higher amortization attributable to growth in our Income Distribution Series.

Interest expense. Interest expense represents interest related to our non-recourse funding obligations. Interest expense increased mainly as a result of the issuance of additional non-recourse funding obligations in the second quarter of 2007 and an increase in average floating rates paid on those obligations.

Provision for income taxes. The effective tax rate decreased to 31.4% for the three months ended March 31, 2008 from 32.0% for the three months ended March 31, 2007. The decrease in the effective rate was primarily attributable to a change related to favorable examination developments in 2007, partially offset by higher tax favored investments over lower expected pre-tax income.

Net income. The decrease in net income was largely the result of an increase in net investment losses from impairments and hedging activity recorded in the first quarter of 2008 and a decrease in net investment income from lower yields. Additionally, there was a decrease of $6.8 million from equity in the net income (loss) of Genworth Life Insurance Company of New York (“GLICNY”). These decreases were partially offset by growth in assets under management.

Investments and Derivative Instruments

Investment results

The following table sets forth information about our net investment income for each component of our investment portfolio for the periods indicated:


	Three months ended March 31,										Increase (decrease)
	2008		2007								2008 vs. 2007
(Amounts in millions)	Yield		Amount			Yield		Amount			Yield		Amount
Fixed maturity securities—taxable	5.5	%	$	214.0		6.1	%	$	231.1		(0.6	)%	$	(17.1	)
Commercial mortgage loans	6.3	%		46.5		6.1	%		43.4		0.2	%		3.1
Equity securities	8.7	%		1.3		1.9	%		0.2		6.8	%		1.1
Other invested assets	2.3	%		9.8		2.2	%		8.2		0.1	%		1.6
Policy loans	5.9	%		6.9		5.8	%		6.8		0.1	%		0.1

Gross investment income before expenses and fees	5.3	%		278.5		5.8	%		289.7		(0.5	)%		(11.2	)
Expenses and fees	(0.2	)%		(7.3	)	(0.1	)%		(4.4	)	(0.1	)%		(2.9	)

Net investment income	5.1	%	$	271.2		5.7	%	$	285.3		(0.6	)%	$	(14.1	)

Yields for fixed maturity and equity securities are based on weighted average amortized cost or cost, respectively. Yields for other invested assets, which included securities lending activity, are calculated net of the corresponding securities lending liability. All other yields are based on average carrying values.

For the three months ended March 31, 2008, the decrease in overall investment yields was primarily attributable to decreased yields on floating rate investments supporting floating rate policyholder liabilities and non-recourse funding obligations.

The following table sets forth net investment gains (losses) for the periods indicated:


	Three months ended March 31,
(Amounts in millions)	2008			2007
Available-for-sale securities:
Realized gains on sale	$	3.2		$	2.4
Realized losses on sale		(2.8	)		(7.2	)
Impairments		(44.2	)		—
Derivatives and other		(24.0	)		2.2
Net unrealized gains on trading securities		2.5			1.6
Commercial mortgage loans		0.1			(0.6	)

Net investments gains (losses)	$	(65.2	)	$	(1.6	)

Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

•

For the three months ended March 31, 2008, net investment losses increased principally from impairments from credit-related events. Impairments included $35.7 million related to securities backed by sub-prime and Alt-A residential mortgage-backed and asset-backed securities. Net investment losses from derivatives were primarily a result of the change in value of derivative instruments used for risk management of variable annuity guaranteed minimum withdrawal benefits not fully offsetting the corresponding changes in the embedded liability during the first quarter of 2008.

•

The aggregate fair value of securities sold at a loss during the three months ended March 31, 2008 and 2007 was $70.5 million and $404.6 million, respectively, which was 96.3% and 98.3% of book value, respectively.

Derivative instruments primarily consist of changes in the fair value of non-qualifying derivatives, including embedded derivatives, changes in fair value of certain derivatives and related hedged items in fair value hedge relationships and hedge ineffectiveness on qualifying derivative instruments.

Investment portfolio

The following table sets forth our cash, cash equivalents and invested assets as of the dates indicated:


	March 31, 2008				December 31, 2007
(Amounts in millions)	Carrying value		% of total		Carrying value		% of total
Fixed maturity securities, available-for-sale ⁽¹⁾ :
Public	$	8,698.1	43.0	%	$	9,217.6	44.3	%
Private		5,655.9	27.9	%		6,019.7	29.0	%
Commercial mortgage loans		2,912.9	14.4	%		2,968.1	14.3	%
Other invested assets		1,645.5	8.1	%		1,437.5	6.9	%
Policy loans		470.3	2.3	%		466.8	2.2	%
Equity securities, available-for-sale		62.6	0.3	%		64.0	0.3	%
Cash and cash equivalents		809.2	4.0	%		616.4	3.0	%

Total cash, cash equivalents and invested assets	$	20,254.5	100.0	%	$	20,790.1	100.0	%

⁽¹⁾

As of March 31, 2008 and December 31, 2007, we had $1,699.5 million and $2,050.1 million, respectively, of residential mortgage-backed and asset-backed securities included in fixed maturities, of which $672.6 million and $888.4 million, respectively, were investment grade securities collateralized by sub-prime residential mortgage loans and $420.5 million and $526.8 million, respectively, were investment grade securities collateralized by Alt-A residential mortgage loans.

For a discussion of the change in cash, cash equivalents and invested assets, see the comparison for this line item under “—Consolidated Balance Sheets.”

We hold fixed maturity and equity securities, trading securities, derivatives, embedded derivatives, securities held as collateral and certain other financial instruments, which are carried at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. All assets carried at fair value are classified and disclosed in one of the following three categories:

•

Level 1—Quoted prices for identical instruments in active markets.

•

Level 3—Instruments whose significant value drivers are unobservable.

See note 4 in our “—Notes to Condensed Consolidated Financial Statements” for additional information regarding the levels.

Our portfolio of fixed maturity securities is comprised primarily of investment grade registered securities. Estimates of fair values for these securities are readily obtained from leading independent pricing services

utilizing market observable inputs consistent with Level 2 inputs. For our less liquid securities, such as our privately placed securities, we utilize third-party asset managers’ data to employ alternative valuation methods commonly used in the financial services industry to estimate fair value. Based on the market observability of the inputs used in estimating the fair value, the pricing level is assigned. As of March 31, 2008, approximately 15% of our investment holdings recorded at fair value were based on significant inputs that were not market observable and were classified as Level 3 measurements.

Security pricing is applied using a hierarchy, or “waterfall” approach. The vast majority of our fixed maturity and equity securities use Level 2 inputs for the determination of fair value. These fair values are obtained primarily from independent pricing services, when available. Because many fixed income securities do not trade on a daily basis, the independent pricing services apply available information through processes such as benchmark curves, benchmarking of like-securities, sector groupings, broker quotes and matrix pricing to prepare evaluations. The independent pricing services’ teams of evaluators gather information from market sources and integrate relevant credit information, perceived market movements and sector news into the evaluated pricing models. Additionally, the independent pricing services perform extensive back-testing procedures to validate and/or refine models as conditions warrant. The independent pricing services also monitor market indicators, industry and economic events as triggers to obtain additional data.

Where pricing services do not provide fair values, internally developed pricing models produce estimates of fair value primarily utilizing Level 2 inputs along with certain Level 3 inputs. The internally developed models include matrix pricing. The pricing matrix begins with current treasury rates and uses credit spreads received from third-party sources to estimate fair value. The credit spreads incorporate the issuer’s industry or issuer-specific credit characteristics and the security’s time to maturity, if warranted. Remaining un-priced securities are submitted to brokers for valuations.

In addition to this “waterfall” approach, we employ other valuation methods that we deem appropriate for certain externally managed funds.

The following table sets forth our investments that are measured at fair value on a recurring basis as of the date indicated:


	March 31, 2008
(Amounts in millions)	Total		Level 1		Level 2		Level 3
Investments:
Fixed maturity securities, available-for-sale	$	14,354.0	$	—	$	12,279.6	$	2,074.4
Equity securities, available-for-sale		62.6		14.8		43.2		4.6
Other invested assets^(a)		1,045.8		—		726.5		319.3

Total investments	$	15,462.4	$	14.8	$	13,049.3	$	2,398.3

^(a)	Includes derivatives, trading securities, restricted other invested assets and securities held as collateral.

Other invested assets presented above only include collateral that is held in the form of securities with any remaining collateral balance representing cash.

The following table presents additional information for investments measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value:


(Amounts in millions)	Fixed maturity securities, available-for- sale			Equity securities, available-for- sale			Other invested assets^(a)			Total
Beginning balance as of December 31, 2007	$	2,044.2		$	5.1		$	227.2		$	2,276.5
Total realized and unrealized gains (losses):
Included in net income		(16.0	)		0.8			46.3			31.1
Included in other comprehensive income (loss)		(161.8	)		—			(0.4	)		(162.2	)
Purchases, sales, issuances and settlements, net		14.2			(1.3	)		52.9			65.8
Transfers in (out) of Level 3		193.8			—			(6.7	)		187.1

Ending balance as of March 31, 2008	$	2,074.4		$	4.6		$	319.3		$	2,398.3

Amount of total gains (losses) for the period included in net income attributable to the change in unrealized gains (losses) relating to assets still held as of the reporting date	$	(16.0	)	$	—		$	46.3		$	30.3

^(a)	Includes trading securities, restricted other invested assets and certain derivatives.

As included in the Level 3 table above, the fair value of fixed maturity securities classified as Level 3 measurements decreased by $161.8 million, primarily the result of a decrease in fair value for mortgage and asset-backed securities. The decrease in fair value of fixed maturity securities classified as Level 3 was offset by an increase, or net transfer in, of securities where the fair value measurement was classified as Level 3 as of March 31, 2008 but was not previously classified as Level 3. The change in classification resulted from an increase in the significance of certain unobservable market inputs, primarily spreads used within our internally developed pricing models, as well as a change in pricing source where significant inputs were not market observable.

Fixed maturity securities

As of March 31, 2008, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	211.3	$	24.4	$	(0.1	)	$	235.6
Tax exempt		13.1		—		(0.1	)		13.0
Government—non U.S.		290.3		24.5		(4.0	)		310.8
U.S. corporate		6,900.5		105.7		(354.4	)		6,651.8
Corporate—non U.S.		1,868.6		9.7		(132.9	)		1,745.4
Mortgage and asset-backed		6,194.9		23.5		(821.0	)		5,397.4

Total fixed maturity securities		15,478.7		187.8		(1,312.5	)		14,354.0
Equity securities		63.8		0.4		(1.6	)		62.6

Total available-for-sale securities	$	15,542.5	$	188.2	$	(1,314.1	)	$	14,416.6

As of December 31, 2007, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our fixed maturity and equity securities classified as available-for-sale were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	189.3	$	18.0	$	(0.1	)	$	207.2
Government—non U.S.		293.0		28.1		(1.4	)		319.7
U.S. corporate		6,983.1		99.6		(207.3	)		6,875.4
Corporate—non U.S.		1,881.6		9.5		(79.7	)		1,811.4
Mortgage and asset-backed		6,398.4		25.7		(400.5	)		6,023.6

Total fixed maturity securities		15,745.4		180.9		(689.0	)		15,237.3
Equity securities		60.5		3.6		(0.1	)		64.0

Total available-for-sale securities	$	15,805.9	$	184.5	$	(689.1	)	$	15,301.3

Changes in gross unrealized gains (losses) in our fixed maturity securities portfolio from December 31, 2007 through March 31, 2008 were primarily a result of continued widening spreads in 2008, particularly in mortgage-backed and asset-backed securities attributable to marketplace uncertainty arising from higher defaults in sub-prime and Alt-A residential mortgage loans.

As of March 31, 2008, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	484.0	$	1.7	$	(62.6	)	$	423.1
AA		232.1		—		(125.0	)		107.1

Subtotal		716.1		1.7		(187.6	)		530.2
A		265.5		0.1		(123.9	)		141.7
BBB		0.7		—		—			0.7
BB		3.0		—		(2.3	)		0.7
B		8.8		—		(4.8	)		4.0
Caa and lower		3.4		—		—			3.4

Total sub-prime securities	$	997.5	$	1.8	$	(318.6	)	$	680.7

As of December 31, 2007, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	659.3	$	1.8	$	(44.3	)	$	616.8
AA		260.5		—		(89.2	)		171.3

Subtotal		919.8		1.8		(133.5	)		788.1
A		159.1		—		(61.0	)		98.1
BBB		2.2		—		—			2.2

Total sub-prime securities	$	1,081.1	$	1.8	$	(194.5	)	$	888.4

Our sub-prime securities were principally backed by first lien mortgages. We did not have significant exposure to second liens or option adjustable rate mortgages. We did not have any exposure to mezzanine collateralized debt obligations (“CDO”), interest margin deals, highly leveraged transactions or CDO-squared investments.

As of March 31, 2008, the estimated fair value of our mortgage-backed and asset-backed securities collateralized by sub-prime residential mortgage loans by vintage and fair value level were as follows:


(Amounts in millions)	Total		Level 1		Level 2		Level 3
Vintage:
2004 and prior	$	91.8	$	—	$	91.6	$	0.2
2005		152.8		—		150.4		2.4
2006		349.8		—		336.7		13.1
2007		86.3		—		82.0		4.3

Total sub-prime securities	$	680.7	$	—	$	660.7	$	20.0


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	369.0	$	—	$	(71.0	)	$	298.0
AA		124.1		1.0		(38.3	)		86.8

Subtotal		493.1		1.0		(109.3	)		384.8
A		45.3		—		(17.8	)		27.5
BBB		19.7		—		(11.5	)		8.2
B		0.1		—		(0.1	)		—

Total Alt-A securities	$	558.2	$	1.0	$	(138.7	)	$	420.5


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	377.4	$	0.2	$	(16.5	)	$	361.1
AA		127.9		0.8		(15.4	)		113.3

Subtotal		505.3		1.0		(31.9	)		474.4
A		60.4		—		(14.6	)		45.8
BBB		9.2		—		(2.6	)		6.6
B		0.1		—		—			0.1

Total Alt-A securities	$	575.0	$	1.0	$	(49.1	)	$	526.9

Gross unrealized losses in our sub-prime and Alt-A residential mortgage-backed and asset-backed securities as of March 31, 2008 were primarily a result of continued widening spreads during 2008 as a result of marketplace uncertainty arising from higher defaults in sub-prime and Alt-A residential mortgage loans. As of March 31, 2008, we expect these investments to continue to perform in accordance with their original contractual terms and we have the ability and intent to hold these securities until the recovery of the fair value up to our cost basis, which may be at maturity.

As of March 31, 2008, the estimated fair value of our mortgage-backed and asset-backed securities collateralized by Alt-A residential mortgage loans by vintage and fair value level were as follows:


(Amounts in millions)	Total		Level 1		Level 2		Level 3
Vintage:
2004 and prior	$	54.8	$	—	$	48.8	$	6.0
2005		147.5		—		139.8		7.7
2006		138.8		—		106.5		32.3
2007		79.4		—		61.1		18.3

Total Alt-A securities	$	420.5	$	—	$	356.2	$	64.3

As of March 31, 2008, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our commercial mortgage-backed securities were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	877.8	$	1.9	$	(79.5	)	$	800.2
AA		212.8		0.2		(38.5	)		174.5

Subtotal		1,090.6		2.1		(118.0	)		974.7
A		227.4		0.2		(54.7	)		172.9
BBB		142.9		4.7		(34.9	)		112.7
BB		13.6		0.4		(3.2	)		10.8
B		3.6		0.3		(0.2	)		3.7
Caa and lower		25.1		0.1		(2.0	)		23.2
In or near default		—		0.1		—			0.1

Total commercial mortgage-backed securities	$	1,503.2	$	7.9	$	(213.0	)	$	1,298.1

As of December 31, 2007, the amortized cost or cost, gross unrealized gains (losses) and estimated fair value of our commercial mortgage-backed securities were as follows:


(Amounts in millions)	Amortized cost or cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Rating:
AAA	$	906.4	$	4.3	$	(27.3	)	$	883.4
AA		227.8		0.2		(17.1	)		210.9

Subtotal		1,134.2		4.5		(44.4	)		1,094.3
A		231.2		0.2		(24.1	)		207.3
BBB		144.5		4.6		(14.4	)		134.7
BB		13.6		0.7		(1.5	)		12.8
B		3.6		0.8		(0.1	)		4.3
Caa and lower		25.2		0.1		(0.7	)		24.6
In or near default		—		0.2		—			0.2

Total commercial mortgage-backed securities	$	1,552.3	$	11.1	$	(85.2	)	$	1,478.2

As of March 31, 2008, the estimated fair value of our commercial mortgage-backed securities by vintage and fair value level were as follows:


(Amounts in millions)	Total		Level 1		Level 2		Level 3
Vintage:
2004 and prior	$	289.4	$	—	$	257.8	$	31.6
2005		108.9		—		97.0		11.9
2006		520.3		—		357.1		163.2
2007		379.5		—		271.0		108.5

Total commercial mortgage-backed securities	$	1,298.1	$	—	$	982.9	$	315.2

As of March 31, 2008, the estimated fair value of all mortgage-backed and asset backed securities not collateralized by sub-prime residential mortgage loans, Alt-A residential mortgage loans or commercial mortgage loans by vintage and fair value level were as follows:


(Amounts in millions)	Total		Level 1		Level 2		Level 3
Vintage:
2004 and prior	$	554.8	$	—	$	527.8	$	27.0
2005		897.2		—		459.8		437.4
2006		746.5		—		667.6		78.9
2007		764.8		—		623.6		141.2
2008		34.8		—		34.8		—

Total other mortgage and asset-backed securities	$	2,998.1	$	—	$	2,313.6	$	684.5

The following table presents the gross unrealized losses and estimated fair values of our investment securities, aggregated by investment type and length of time that individual investment securities have been in a continuous unrealized loss position, as of March 31, 2008:


	Less Than 12 Months						12 Months or More
(Dollar amounts in millions)	Estimated fair value		Gross unrealized losses			# of securities	Estimated fair value		Gross unrealized losses			# of securities
Description of Securities
Fixed maturity securities:
U.S. government, agencies and government sponsored entities	$	6.6	$	(0.1	)	3	$	—	$	—		—
State municipal		13.0		(0.1	)	1		—		—		—
Government—non U.S.		46.3		(4.0	)	22		—		—		—
U.S. corporate		2,401.3		(178.5	)	372		1,365.7		(175.9	)	241
Corporate—non U.S.		949.7		(80.7	)	138		416.3		(52.2	)	59
Asset-backed		2,113.9		(244.4	)	247		930.8		(191.3	)	150
Mortgage-backed		1,367.2		(230.8	)	288		501.6		(154.5	)	160

Subtotal, fixed maturity securities		6,898.0		(738.6	)	1,071		3,214.4		(573.9	)	610
Equity securities		32.8		(1.2	)	4		0.8		(0.4	)	3

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613

% Below cost—fixed maturity securities:
<20% Below cost	$	6,406.4	$	(427.4	)	917	$	2,723.6	$	(272.9	)	451
20-50% Below cost		418.3		(164.6	)	113		429.6		(170.3	)	113
>50% Below cost		73.3		(146.6	)	41		61.2		(130.7	)	46

Total fixed maturity securities		6,898.0		(738.6	)	1,071		3,214.4		(573.9	)	610

% Below cost—equity securities:
<20% Below cost		32.8		(1.2	)	4		0.8		(0.4	)	3
>50% Below cost		—		—		—		—		—		—

Total equity securities		32.8		(1.2	)	4		0.8		(0.4	)	3

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613


Investment grade	$	6,600.6	$	(703.5	)	960	$	3,097.6	$	(552.1	)	568
Below investment grade		330.2		(36.3	)	115		117.6		(22.2	)	45

Total temporarily impaired securities	$	6,930.8	$	(739.8	)	1,075	$	3,215.2	$	(574.3	)	613

The investment securities in an unrealized loss position as of March 31, 2008 consisted of 1,688 securities accounting for unrealized losses of $1,314.1 million. Of these unrealized losses of $1,314.1 million, 95.5% were investment grade (rated AAA through BBB-) and 53.4% were less than 20% below cost. The amount of the unrealized loss on these securities was primarily attributed to widening credit spreads during 2008, particularly in our sub-prime and Alt-A residential mortgage and asset-backed securities. Of the investment securities in an unrealized loss position for twelve months or more as of March 31, 2008, 15 securities were 20% or more below cost and below investment grade (rate BB+ and below) for twelve months or more. These securities accounted for unrealized losses of $12.7 million.

Other invested assets

The following table sets forth the carrying values of our other invested assets as of the dates indicated:


	March 31, 2008				December 31, 2007
(Amounts in millions)	Carrying value		% of total		Carrying value		% of total
Restricted other invested assets	$	397.7	24.2	%	$	399.8	27.8	%
Investment in unconsolidated subsidiary		316.9	19.3			346.5	24.1
Limited partnerships		282.0	17.1			262.3	18.2
Derivatives		362.5	22.0			213.3	14.9
Securities lending collateral		202.4	12.3			152.4	10.6
Trading securities		83.2	5.1			62.3	4.3
Other investments		0.8	—			0.9	0.1

Total other invested assets	$	1,645.5	100.0	%	$	1,437.5	100.0	%

Derivatives increased due to hedges in our FABNs and the acquisition of options to hedge risk embedded in certain products within our Retirement Income and Institutional segment. The increase in securities lending was driven by the expansion of our program in 2008. Limited partnerships increased primarily due to capital calls.

Derivative instruments

The fair value of derivative instruments is based upon either prices obtained from an independent third party or pricing valuation models utilizing market inputs from an independent third party. The following table sets forth our positions in derivative instruments and the estimated fair values as of the dates indicated:


	March 31, 2008						December 31, 2007
(Amounts in millions)	Notional value		Assets		Liabilities		Notional value		Assets		Liabilities
Interest rate swaps	$	3,184.7	$	142.5	$	49.7	$	2,513.7	$	73.8	$	24.4
Equity index options		1,037.7		190.0		—		877.6		115.6		—
Limited guarantee		250.0		30.0		—		250.0		23.9		—
Financial futures		189.2		—		—		12.5		—		—
Credit default swaps		56.1		—		0.7		—		—		—

Total derivatives	$	4,717.7	$	362.5	$	50.4	$	3,653.8	$	213.3	$	24.4

The increase in the notional value of derivatives was primarily a result of entering into interest rate swaps with a notional value of $216.0 million to convert fixed rate assets or liabilities into floating rate assets or liabilities consistent with the overall asset-liability management for our FABN products. In addition, we had increases in notional value of $455.0 million and $160.1 million for interest rate swaps and equity index options, respectively, to improve asset-liability management for our variable annuity products. We also had increases in notional value of $176.7 million for financial futures and $56.1 million for credit default swaps. Genworth provides a limited parental guarantee to Rivermont I, which is accounted for as a derivative under Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, and carried at fair value.

Consolidated Balance Sheets

Total assets. Total assets decreased $1,059.8 million to $44,917.3 million as of March 31, 2008 from $45,977.1 million as of December 31, 2007.

•

Cash, cash equivalents and invested assets decreased $535.6 million primarily due to an increase in unrealized net investment losses from the current interest rate environment in our fixed maturity securities portfolio, partially offset by an increase in our securities lending program, trading portfolio and derivative activity.

•

Deferred acquisition costs increased $107.3 million associated with the growth of our insurance in-force in term life insurance and variable annuities, primarily our Income Distribution Series.

•

Separate account assets decreased $661.9 million as a result of unfavorable market performance of the underlying securities and an increase in death, surrender and other benefits.

Total liabilities. Total liabilities decreased $703.8 million to $40,986.9 million as of March 31, 2008 from $41,690.7 million as of December 31, 2007.

•

Deferred tax liability decreased $163.8 million from lower deferred taxes as a result of increased net unrealized investment losses.

•

Other liabilities increased $101.2 million mainly from an increase in our securities lending program and derivative activity.

•

Separate account liabilities decreased $661.9 million as a result of unfavorable market performance of the underlying securities and an increase in death, surrender and other benefits.

Stockholder’s equity. Stockholder’s equity decreased $356.0 million to $3,930.4 million as of March 31, 2008 from $4,286.4 million as of December 31, 2007.

•

Current year net income was $53.5 million.

•

Accumulated other comprehensive loss increased $409.2 million primarily driven by an increase in unrealized net investment losses from the current interest rate environment.

•

There was a decrease of $0.3 million primarily attributable to a deemed dividend related to taxes.

Liquidity and Capital Resources

~~For~~The ~~the~~principal liquidity ~~six~~requirements ~~months~~for ~~ended~~our ~~June~~insurance ~~30,~~operations ~~2005~~are ~~and~~our ~~2004,~~contractual ~~cash~~obligations ~~flows~~to ~~from~~contractholders ~~operating~~ and ~~financing activities were $(786~~annuitants.3) ~~million~~Contractual ~~and~~obligations ~~$(274.7)~~include ~~million,~~payments ~~respectively.~~of ~~For~~claims ~~the~~under ~~six~~outstanding ~~months~~insurance ~~ended~~policies ~~June~~and 30annuities, ~~2005,~~contract ~~net~~withdrawals ~~cash~~and surrender ~~from~~benefits. ~~financing~~The ~~activities relating~~primary tosources ~~investment~~for ~~contract~~meeting ~~issuances~~these ~~and~~contractual ~~(redemptions)~~obligations ~~were~~are ~~$625.1~~investment ~~million~~activities and ~~$(1,544.5)~~cash ~~million,~~generated ~~respectively~~from operating activities. We maintain a ~~committed~~master ~~credit~~promissory note and committed line with an indirect parent, GNA Corporation (“GNA”), of $500.0 million toin total. The master promissory note and committed line provide liquidity to meet normal variation in cash requirements. ~~There~~In ~~was~~addition, nothe ~~amount~~master ~~outstanding~~promissory asnote is structured to provide us the ability to lend to GNA at a comparable short-term investment return. As of ~~June~~March 31, 302008 and December 31, ~~2005~~2007, GNA owed us $0.5 million which was included in other assets in the consolidated balance sheets.

AsThe anfollowing ~~insurance~~table ~~business,~~sets ~~cash~~forth ~~flows from operating and financing activities, as premiums and deposits collected from~~ our ~~insurance~~condensed ~~and~~consolidated ~~investment products net of redemptions and benefits paid, are invested if positive and investments are used if negative. Net~~ cash ~~from~~flows ~~investing activities was $880.8 million and $308.6 million~~ for the ~~six~~three months ended ~~June~~March 31: 30, 2005 and 2004, respectively. The increase was primarily attributable to a decrease of cash from financing activities resulting from management’s strategy of reducing floating-rate funding agreement liabilities.

As of June 30, 2005, we had approximately $300.0 million of floating-rate funding agreements, which are deposit-type products that generally credit interest on deposits at a floating-rate tied to an external market index. Purchasers of funding agreements include money market funds, bank common trust funds and other short-term investors. Some of our funding agreements contain “put” provisions, through which the contractholder has an option to terminate the funding agreement for any reason after giving notice within the contract’s specified notice period. Of the $300.0 million aggregate amount outstanding as of June 30, 2005, $100.0 million had put option features, including $50.0 million with put option features of 90 days and $50.0 million with put option features of 180 days. GE Capital guaranteed certain obligations under floating-rate funding agreements with a final maturity on or before June 30, 2005. As of June 30, 2005, we no longer have any funding agreements guaranteed by GE Capital.


(Amounts in millions)	2008			2007
Net cash from operating activities	$	35.1		$	43.9
Net cash from investing activities		255.1			116.6
Net cash from financing activities		(97.4	)		(359.2	)

Net increase (decrease) in cash and cash equivalents	$	192.8		$	(198.7	)

Cash flows from operating activities are affected by the timing of premiums, fees and investment income received and expenses paid. Principal sources of cash include sales of our products and services. As an insurance business, we typically generate positive cash flows from operating activities, as premiums collected from our insurance products exceed policy acquisition costs, benefits paid and redemptions. These positive cash flows are then invested to support the obligations of our insurance and investment products and required capital supporting these products. The decrease in cash flows from operating activities for the three months ended March 31, 2008 was primarily the result of the timing of cash settlements of other assets and liabilities.

Accordingly, in analyzing our cash flows, we focus on the change in the amount of cash available and used in investing activities. The increase in cash from investing activities for the three months ended March 31, 2008 was primarily the result of a decrease in purchases of investments as we have issued fewer FABNs and no non-recourse funding obligations during the first quarter of 2008.

Changes in cash from financing activities primarily related to the issuance of, and redemptions and benefit payments on, investment contracts, issuance and repayment of non-recourse funding obligations and dividends to our stockholders. For the three months ended March 31, 2008, there was a net decrease in investment contracts of $118.2 million driven by a decrease in FABN issuances. In first quarter of 2007, we redeemed $110.0 million of our preferred stock and repaid our note payable to GNA.

Insurance companies are restricted by states as to the aggregate amount of dividends they may pay to their parent in any consecutive twelve-month period without regulatory approval. Dividends in excess of the prescribed limits or the earned surplus are deemed “extraordinary” and require formal state insurance department approval. We are able to pay $496.9 million in dividends in 2008 without obtaining regulatory approval.

During 2005, we transferred investment securities to an affiliated special purpose entity (“SPE”), whose sole purpose is to securitize these investment securities and issue secured notes to various affiliated companies. The securitized investments are owned in their entirety by the SPE and are not available to satisfy the claims of our creditors. The value of those securities was $397.7 million and $399.8 million as of March 31, 2008 and December 31, 2007, respectively.

Capital resources and financing activities

As of March 31, 2008, we had $3.6 billion of fixed and floating rate non-recourse funding obligations outstanding backing additional statutory reserves, of which $1.7 billion were guaranteed by third-party financial guaranty insurance companies. The interest rates on these obligations are subject to rate resets triggered by negative rating agency action on the third-party financial guaranty insurance companies that guaranteed these obligations. During 2007 and 2008, the rates on those $1.7 billion of non-recourse funding obligations were contractually reset to higher rates and continue to be subject to rate resets. We may issue additional non-recourse funding obligations from time to time to help satisfy our statutory reserve requirements.

As of March 31, 2008, we had approximately $150.0 million of renewable floating rate funding agreements, which are deposit-type products that generally credit interest on deposits at a floating rate tied to an external market index. Purchasers of renewable funding agreements include money market funds, bank common trust funds and other short-term investors. Some of our funding agreements contained “put” provisions, through which the contractholder has an option to terminate the funding agreement for any reason after giving notice within the contract’s specified notice period. Of the $150.0 million aggregate amount outstanding as of March 31, 2008, none had put option features.

Our Retirement Income and Institutional segment previously issued a combined $3,777.4 million of FABNs and funding agreements, of which $550.0 million offer contractholders the option to make periodic elections to extend the maturity date of the contract as of March 31, 2008. The current credit market conditions have made

these types of institutional products less attractive compared to alternative products offering higher yields with more liquidity. Therefore, during 2007 and 2008, certain contractholders did not extend the maturity on approximately $550.0 million of outstanding notes, all of which will mature over the next twelve months.

As of March 31, 2008, we had approximately $658.2 million of GICs. Substantially all of these contracts allow for the payment of benefits at contract value to ERISA plans prior to contract maturity in the event of death, disability, retirement or change in investment election. We carefully underwrite these risks before issuing a GIC to a plan and historically have been able to effectively manage our exposure to these benefit payments. Our GICs typically credit interest at a fixed interest rate and have a fixed maturity generally ranging from two to six years. Contracts provide for early termination by the contractholder but are subject to an adjustment to the contract value for changes in the level of interest rates from the time the GIC was issued plus an early withdrawal penalty.

We believe our cash flows from investment activities and our master promissory note and committed line with GNA will provide us with sufficient liquidity to meet our operating requirements for the foreseeable future.

Contractual obligations and commercial commitments

We enter into obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed based upon an analysis of these obligations. The most significant factor affecting our future cash flows is our ability to earn and collect cash from our customers. Future cash outflows, whether they are contractual obligations or not, also will vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings. Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates and market performance. Many of our obligations are linked to cash-generating contracts. These obligations include payments to contractholders that assume those contractholders will continue to make deposits in accordance with the terms of their contracts. In addition, our operations involve significant expenditures that are not based upon “commitments.” These include expenditures for income taxes and payroll.

The current credit market conditions have made institutional products less attractive compared to alternative products offering higher yields with more liquidity. Therefore, during 2007 and 2008, certain contractholders did not extend the maturity on approximately $550.0 million of outstanding notes, all of which will mature over the next twelve months.

Except as discussed above, there have been no material additions or changes to our contractual obligations and commercial commitments as set forth in our 2007 Annual Report on Form 10-K filed on February 28, 2008.

Off-Balance Sheet Transactions

We have used off-balance sheet securitization transactions to mitigate and diversify our asset risk position and to adjust the asset class mix in our investment portfolio by reinvesting securitization proceeds in accordance with our approved investment guidelines.

The transactions we have used involved securitizations of some of our receivables and investments that were secured by commercial mortgage loans, fixed maturity securities or other receivables, consisting primarily of policy loans. As of March 31, 2008 and December 31, 2007, total securitized assets remaining were $268.7 million and $279.4 million, respectively.

There were no off-balance sheet securitization transactions in the first quarter of 2008 or 2007.

We have arranged for the assets that we have transferred in securitization transactions to be serviced by us directly, or pursuant to arrangements, with a third-party service provider. Servicing activities include ongoing review, credit monitoring, reporting and collection activities.

Financial support is provided under credit support agreements in which Genworth provides limited recourse for a maximum of $119.0 million of credit losses in such entities. We do not provide any such recourse. Assets with credit support are funded by demand notes that are further enhanced with support provided by a third party.

New Accounting Standards

For a discussion of recently adopted and not yet adopted accounting standards, see note 2 in our “—Notes to Condensed Consolidated Financial Statements.”

Item 3. Quantitative and Qualitative Disclosures about Market Risk

~~Information~~Market ~~omitted~~risk is the risk of the loss of fair value resulting from adverse changes in ~~accordance~~market ~~with~~rates ~~General~~and ~~Instructions~~prices, Hsuch ~~(2)(c)~~as interest rates, foreign currency exchange rates and equity prices. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying financial instruments are traded. The following is a discussion of our market risk exposures and our risk management practices.

Since the third quarter of 2007, credit markets experienced reduced liquidity, higher volatility and widening credit spreads across asset classes, mainly the result of marketplace uncertainty arising from higher defaults in sub-prime and Alt-A mortgage loan collateral underlying residential mortgage-backed securities. See “—Business trends and conditions” and “—Investments and Derivative Instruments” in “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the current market conditions.

There were no other material changes in these risks since December 31, 2007.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of ~~June 30~~March 31, ~~2005~~2008, an evaluation was carried out under the supervision and with the participation of ~~the~~our ~~Company’s~~ management, including our Chief ~~Executive~~ Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) under the Securities Exchange Act of 1934). Based ~~upon~~on ~~that~~ this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting During the Quarter Ended ~~June 30~~March 31, ~~2005~~2008

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June 30~~March 31, ~~2005~~2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

1136

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We face a significant risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, payment of contingent or other sales commissions, claims payments and procedures, product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, ~~and~~charging ~~breaches~~excessive ofor impermissible fees on products, recommending unsuitable products to customers and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages, which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. We are also subject to various regulatory inquiries, such as information requests, subpoenas, ~~and~~ books and record examinations~~, from~~ and market conduct and financial examinations from state and federal regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition and results of operations.

~~Recently,~~There ~~the~~were ~~insurance~~no ~~industry~~material ~~has~~developments ~~become~~during the ~~focus~~quarter ~~of increased scrutiny by regulatory and law enforcement authorities concerning certain practices within the insurance industry. In this regard,~~ in ~~May~~any ~~2005, we received a subpoena from the Northeast Regional Office~~ of the ~~Securities~~legal ~~and~~proceedings ~~Exchange~~identified ~~Commission, requiring the production of documents related to “certain loss mitigation insurance products,” such as finite risk reinsurance. We are cooperating fully with the SEC~~ in ~~connection~~Part ~~with its subpoena. In June 2005~~1, ~~General~~Item 3 ~~Electric Company (“GE”) received a subpoena from the United States Attorneys Office for the Southern District~~ of ~~New~~our ~~York,~~2007 onAnnual ~~the~~Report ~~same general subject. In the subpoena, GE is defined as including, among other things, its subsidiaries and affiliates. We are~~on ~~cooperating~~Form ~~with GE in connection with GE’s response to the subpoena~~10-K.

~~This~~We ~~industry~~cannot ~~scrutiny~~ensure ~~also~~that ~~includes~~ the ~~commencement~~current of investigations and ~~other~~ proceedings bywill ~~the~~not ~~New~~have ~~York~~a ~~State~~material ~~Attorney~~adverse ~~General~~effect ~~and~~on ~~other~~our ~~governmental authorities relating to allegations of improper conduct in~~business, ~~connection~~financial ~~with~~condition ~~the~~or ~~payment~~results of, ~~and~~operations. ~~the~~In ~~failure to disclose~~addition, ~~contingent~~it ~~commissions~~is bypossible ~~insurance~~that ~~companies~~related toinvestigations ~~insurance brokers~~ and ~~agents,~~proceedings ~~the~~may ~~solicitation~~be ~~and~~commenced ~~provision of fictitious or inflated quotes, the use of inducements to brokers or companies~~ in the ~~sale~~future, ~~of insurance products~~ and ~~the~~we ~~use~~could ofbecome ~~captive~~subject ~~reinsurance~~to ~~arrangements.~~further Weinvestigations and have ~~not~~lawsuits ~~received~~filed aagainst ~~subpoena or inquiry from the State of New York with respect to these matters~~us. ~~However, as part of industry-wide inquiries in this~~In ~~regard~~addition, weincreased ~~have~~regulatory ~~received~~scrutiny ~~inquiries~~ and ~~informational~~any ~~requests~~resulting ~~with~~investigations ~~respect~~or toproceedings ~~some~~could ofresult ~~these~~in ~~matters~~new ~~from~~legal ~~other~~precedents ~~federal~~ and ~~state~~industry-wide ~~regulatory~~regulations ~~authorities.~~or Wepractices ~~have~~that ~~responded~~could toadversely ~~these~~affect ~~inquiries~~our ~~and~~business, ~~informational~~financial ~~requests~~condition and ~~will~~results ~~continue to cooperate~~of ~~with these regulatory authorities~~operations.

~~Recent industry-wide~~ inquiries also include those regarding market timing and late trading in variable annuity contracts, variable annuity sales practices/exchanges and electronic communication document retention practicesItem 1A. InRisk ~~this~~Factors regard, we responded in late 2003 to a New York State Attorney General subpoena regarding market timing and late trading in variable products and mutual funds. We have not received any further inquiries from the New York State Attorney General regarding these matters, although we received inquiries and informational requests regarding these matters from other federal and state regulatory authorities. We have responded to these inquiries, follow-up inquiries and informational requests and will continue to cooperate with these regulatory authorities.

WeThe ~~cannot~~discussion ~~assure~~of ~~you~~our ~~that~~business ~~the current investigations~~ and ~~proceedings~~operations ~~will~~should ~~not~~be ~~have~~read atogether ~~material~~with ~~adverse~~the ~~effect~~risk factors oncontained ~~our~~in ~~business,~~Item 1A ~~financial~~of ~~condition~~our or2007 ~~results~~Annual ofReport ~~operations.~~on ItForm is10-K, ~~also~~which ~~possible~~describes ~~that~~various ~~related~~risks ~~investigations~~ and ~~proceedings~~uncertainties ~~may~~to bewhich ~~commenced~~we inare ~~the~~or ~~future,~~may ~~and we could~~ become subject. toThese ~~further~~risks ~~investigations~~ and uncertainties have ~~lawsuits~~the ~~filed~~potential ~~against~~to ~~us.~~affect Inour ~~addition~~business, ~~increased~~financial condition, ~~regulatory~~results ~~scrutiny~~of ~~and~~operations, ~~any~~cash ~~resulting~~flows, ~~investigations~~strategies or ~~proceedings~~prospects ~~could~~in ~~result~~a inmaterial ~~new~~and ~~legal~~adverse ~~precedents~~manner. ~~and~~As ~~industry-wide~~of ~~regulations~~March 31, or2008, ~~practices~~there ~~that could~~have ~~adversely~~been ~~affect~~no ~~our~~material ~~business,~~changes ~~financial~~to ~~condition~~the ~~and~~risk ~~results~~factors ofset ~~operation~~forth in the above-referenced filing.

12 Item 6. Exhibits


12		Statement of Ratio of Income to Fixed Charges

31.1		Certification of Pamela S. Schutz

31.2		Certification of Dennis R. Vigneau

32.1		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Pamela S. Schutz

32.2		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Dennis R. Vigneau

In our investment-related operations, we are subject to, and may become subject to further litigation involving commercial disputes with counterparties or others and class action and other litigation alleging, among other things, that we made improper or inadequate disclosures in connection with the sale of assets and annuity and investment products or charged excessive or impermissible fees on these products, recommended unsuitable products to customers or breached fiduciary or other duties to customers. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships.

Except as described below, there have been no material developments in any of the legal proceedings identified in Part 1, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2004. In addition there were no new material legal proceedings during the quarter.

In our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, we identified settlements in principle with two groups of class members who had elected to exclude themselves from the class action settlement in McBride v. Life Insurance Co. of Virginia dba GE Life and Annuity Assurance Co. During the second quarter of 2005, those settlements in principle were finalized.

Item 6. Exhibits and Reports on Form 8-K

a. Exhibits

Exhibit 31.1		Certification of Pamela S. Schutz
Exhibit 31.2		Certification of J. Kevin Helmintoller
Exhibit 32.1		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—Pamela S. Schutz
Exhibit 32.2		Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code—J. Kevin Helmintoller

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			GE LIFE AND ANNUITY ASSURANCE COMPANY (Registrant)
	GENWORTH LIFE AND ANNUITY INSURANCECOMPANY (Registrant)
Date: [July 29, 2005]			By:	/s/ J. KEVIN HELMINTOLLER
Dated: April 29, 2008
				J. Kevin Helmintoller,
	By:	/s/ DENNIS R. VIGNEAU
				Senior Vice President and Chief Financial Officer(Principal Financial Officer)
		Dennis R. Vigneau Senior Vice President—Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

1438

Table of Contents

Table of Contents

Table of Contents

Filing Compare · GENWORTH LIFE & ANNUITY INSURANCE CO